Is the Australian healthcare sector about to undergo another bout of takeover speculation?
Shares in Australian Pharmaceutical Industries rose sharply yesterday, closing 13c higher at $2.08 after running as high at $2.12.
The shares have now jumped 25c, from $1.89, since the first week of March, with only some buying by two substantial shareholders to only known factors.
Yesterday’s run up came on a high 10.68 million shares, indicating that perhaps someone was taking a stake in the under performing pharmacy and drug distributor.
API is the key to whatever rationalisation is going to happen.
Sydney solicitor, Chris Murphy continues to accumulate shares in API and now has 20.15 million, or 7.84 per cent.
Schroder Investment Management has lifted its stake to 9.01 per cent or more than 23.1 million shares.
Both are important shareholdings given the growing instances of deals being blocked or potentially blocked by shareholders with just under or more than 10 per cent stakes: Qantas, Rebel Sport (which went through), the ANZ bid for Etrade which is held up and of course the Cemex offer for Rinker Group.
The buying of both Murphy and Schroder has supported the API share price in the wake of a poor upgrade announcement in January and the ‘no’ to the last ‘bid’ from Sigma Pharmaceuticals last year.
Sigma is due to reveal its 2006-07 result next Monday .
The company is not expected to produce anything sensational.
Analysts are interested to see what it says about the future of its so called big box approach to pharmacies which seems to have been supplanted by a new approach called ‘Embrace” which is a combination of financial and business support for participating pharmacies.
But analysts will also be watching to see if Sigma shows any further interest in API, which is a rival distributor.
Sigma made two passes at API late last year, both which failed because the target wasn’t interested.
Both attempts faced enormous problems with the competition regulator, the ACCC and would have struggled to get up.
Then there was the Symbion/Primary dalliance back in January and February but that went nowhere in the end.
Interestingly Schroder, which has that growing stake in API, is also a big shareholder in Symbion. It revealed a month ago today that it had lifted its stake in SYB to 9.70 per cent from 8.59 per cent. That’s an increase of more than 7.1 million shares to 62.58 million.
API though looks like it remains the key to whatever rationalisation is going to happen.
Sigma’s informal or possible offers were around $2.20 to $2.60 a share.
API shares were around $1.96 Tuesday, and rose yesterday on that high volume.
It can’t be a sudden improvement in earnings as the company said earlier this month that third quarter trading had been at best OK.
“The stabilisation of the Pharmacy division is evident, as it has matched the sales performance from the same period last year. The Retail division had a positive Christmas trading period and sales for the three months are up more than 6% on the same period last year.
“In December API also advised that it forecast an EBITD for the second half of approximately $39 million. Third quarter operating results are in-line with the company’s expectations.
“API notes that in regard to general trading conditions the pharmacy industry has continued positively from January while there has been some evidence of slower growth rates in the retail sector.”
That almost after thought about ‘slower growth rates in the retail sector’ has made some analysts sceptical of the company’s second half ambitions.
That’s why they will be watching the Sigma result next Monday to see if it shows up in its results, or is peculiar to API. It’s also why a query from the ASX is now in order.
SYB shares closed down 7c at $3.73 and SIP shares were off 4c at $2.46
