Home »Editor’s Tips» Bid war: API (ASX: API) share price rises on new Sigma (ASX: SIG) bid
The share price of Australian Pharmaceutical Industries (ASX: API) rises after Sigma Healthcare Ltd (ASX: SIG) is competing with Wesfarmers Ltd (ASX: WES) to acquire API.
API is best known as the parent company of Priceline Pharmacy and Soul Pattinson Chemist, ClearSkincare and others. The company is over 100 years old.
Wesfarmers has been trying to acquire API since July 2021, with an initial offer of $ 1.38 per share that was rejected.
On September 16, 2021, Wesfarmers took away an offer of $ 1.55 per share. The API board said it intends to unanimously recommend the revised offering to shareholders. As long as no better offer came, of course.
API announced today that it has received a takeover offer from Sigma. The offer is a combination of $ 0.35 in cash and 2.05 shares of Sigma for each API share. This is a value of $ 1.57 per API share, based on Sigma’s closing price of $ 0.595 yesterday.
There will also be a « mix and match » option between maximum cash or maximum number of shares if the deal goes through.
The offer is in a very early stage and is subject to a list of conditions, including due diligence and regulatory approval. Of course, it must also be recommended by the API board and accepted by API shareholders.
Under this proposed offer, API shareholders would own approximately 48.8% of the merged company. Sigma believes that the merger of API with Sigma will benefit API shareholders and create synergies between the two companies.
Sigma said the combination of the two companies has potential cost synergies of at least US $ 45 million -Dollars per year.
The API Board of Directors said the Sigma offering could be a cheaper offer for API shareholders.
The Board of Directors decided to allow Sigma to conduct its due diligence. This is in addition to offering Wesfarmers to conduct its due diligence.
API pointed out that there is no guarantee that this potential deal with Sigma will be completed.
Nor is there any guarantee that Wesfarmers increased its offer after that, we’ll just have to wait and see.
API share price is up over 5% to $ 1.54 at the time of writing. This is 1.9% less than Sigma’s offer value of USD 1.57 per share.
However, the price of Sigma shares has also risen and is up over 3%. This is noteworthy as the Sigma offering includes Sigma shares.
Of course, we will have to wait and see what the Wesfarmer might bring back to the table.
I am very interested to see how this develops. However, I am not a buyer of API as these takeover bids are priced in. I’m looking for other opportunities for ASX growth stocks.
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