AUSTRALIAN Pharmaceutical Industries has blasted Sigma's rejection of its takeover bid (PD breaking news yesterday), saying the Sigma Board had "chosen a path to restructure its significantly downsized business, rather than pursue a merger to create a future that benefits consumers, pharmacists and both sets of shareholders".
Sigma Healthcare yesterday released its assessment of API's non-binding indicative proposal (PD 17 Dec 2018), with a statement confirming it had decided the offer was "not in the best interests of Sigma shareholders".
Over the last couple of months Sigma and API have engaged in a "limited form of due diligence focused on the synergy and regulatory workstreams" including the mutual sharing of high level information through virtual data rooms and in-person sessions.
Sigma said this process had confirmed there was a sound basis for savings of $60 million per annum in any merger, much of which would come from consolidating the combined supply chain to Sigma-owned warehouses.
However Sigma has also undertaken a business transformation review (PD 12 Feb 2019) that has identified cost efficiencies of over $100 million deliverable as a standalone business over the next 18-24 months, the company said.
Sigma Chairman, Brian Jamieson, said the Board was confident that the currrent API proposal "does not reflect the long-term prospects and value inherent in Sigma having regard to the reset cost base of the business and our own growth agenda...we believe it is not in the best interests of our shareholders".
API responded, saying that based on the Sigma announcement it was clear that the proposal to pursue a merger between the companies was "unable to be taken forward".
API said the publicly available information on the Sigma restructure "remains highly uncertain and unclear, while the business will be significantly downsized following the decision by Sigma's major customer (Chemist Warehouse) to take its business elsewhere.
"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," API claimed.
The 5% shareholding in Sigma acquired by API prior to lodging its proposal is now under review, and API said it had closed its data room.
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