Sigma proposes merger with API

Sigma Healthcare made a $773.5 million bid for Australian Pharmaceutical Industries, pushing API share over 3% higher after the news

Sigma believes that the rationale for a combination of API and Sigma is highly compelling, with significant benefits accruing to both sets of shareholders, the industry and other stakeholders. Sigma believes a merged Sigma and API would result in:

• Revenue stream, product and customer diversification;

• Significant synergies and other efficiencies available for the benefit of both API and Sigma shareholders and other stakeholders;

• Stronger platform to operate in a changing industry landscape;

• The combined entity (MergeCo) will benefit from Sigma’s best-in-class and modern distribution capability; and

• Greater scale and balance sheet capacity.

Under the proposal, API shareholders would receive consideration of 2.05 Sigma shares plus $0.35 cash for each API share held. Based on the most recent closing price of Sigma shares ($0.595 per share on 24 September 2021), the proposal implies a value of $1.57 per API share before synergies.

API previously opened its books to Wesfarmers after the WA-based conglomerate increased its takeover offer to $763.6 million.

Sigma operates pharmacies under the Amcal, Guardian, Discount Drug Stores, PharamSave and Wholelife brands, which are owned by API. API has granted Sigma access to perform due diligence on its pharmacies that are currently owned by API.

The Sigma board said the merger of the pharmacy groups would benefit API shareholders as a whole and would likely be more favourable than the latest proposal from Wesfarmers.