Australia's Sigma Healthcare board rejects API takeover bid

Sigma rejects API merger proposal

Sigma rejects API merger proposal

Citi analysts estimated API would need to lift the bid price to about 73¢ per share from its offer that valued Sigma at 69¢ per share.

Sigma Healthcare (ASX:SIG) has turned down a merger offer from Australian Pharmaceuticals Industries (ASX:API), saying it stood to gain more if it continued operations as a standalone company.

Sigma chairman Brian Jamieson said the API proposal did not reflect Sigma's long-term prospects and inherent value.

Sigma told the market in yesterday's statement that API had reaffirmed its indicative offer last week and waived a condition relating to cost synergies after due diligence.

Sigma chairman Brian Jamieson said he and the board had formed the view the merger was not in the best interests of shareholders.

"Based on Sigma's publicly disclosed earnings guidance, it is clear that a substantial portion of the claimed $100m cost savings will be offset by lost Chemist Warehouse revenue". Sigma replied that it would consider the offer, but would first complete a business-wide review of its future potential as a standalone company.

API criticised Sigma for cutting off talks and prioritising "the uncertain restructure of its standalone business", which will be downsized significantly following the loss of Chemist Warehouse contract.

At 1031 AEDT Sigma shares were trading at 59 cents a share, down 3.28 per cent. API shares were trading at $1.3875 a share, down 0.89 per cent.

Sigma has been cutting costs and launched a business review with Accenture after it lost the major Chemist Warehouse contract a year ago.

It said it has closed its data room and is now reviewing its shareholding in Sigma, which it acquired in the latter part of 2018.

Mr Hooper pointed to Sigma's soon-to-be debt-free balance sheet, with the $300 million of working capital freed up from the Chemist Warehouse contract to be directed to growth opportunities, including aquisitions, creating more value for suffering investors.