Africa’s biggest generics drugs group has been revealed as the bidder for the struggling local group, Sigma Pharmaceuticals.
AspenPharma was named yesterday by Sigma in a short statement to the ASX.
According to its Australian website Aspen has been in Australia since 2001 and currently has annual sales here of $180 million.
It has offered 60c a share for Sigma, which has been crippled by incompetent management and a $US389 million loss for the year to January.
The CEO, chairman, CFO and one other board member have all departed; the company says it has to raise $90 million in asset sales to satisfy its banks. It doesn’t have $90 million of assets that are readily saleable. So it is a sitting duck for Aspen.
Sigma shares were trading at 34.5c when the offer was revealed on Friday, but jumped to 48c after the proposed offer was revealed.
They rose 1c yesterday to 49c.
But the biggest question from this offer (which values Sigma at just $707 million, or less than amount owed to its banks and other creditors), is what Aspen does with the distribution business, which is a retailing and logistics asset.
Unless resolved satisfactorily, the future of the distribution business of Sigma could be the major stumbling block to the success of the Aspen bid.
It’s likely that the distribution business (Aspen has no expertise in this) will be sold off to the likes of Woolies, Coles or Metcash (IGA).
All have wanted to get into the business but have been blocked by strong opposition from The Pharmacy Guild of Australia.
Metcash tried to bid for Symbion in partnership with Sigma back in 2008, but abandoned the bid after the ACCC indicated preliminary concerns to the proposal, and amid opposition from pharmacists.
Sigma and Metcash had an agreement under which they would enter into a logistics joint venture if Metcash managed to acquire the Symbion pharmacy business.
Primary Healthcare had launched a takeover offer for Symbion, but had to sell the distribution and logistics business.
The Guild has long opposed attempts by Woolies and Coles to move deeper into pharmacies and prescription drugs.
The competition regulator, the ACCC, will block any move by Symbion or Australian Pharmaceutical Industries (API) to try and buy Sigma’s distribution business, so it would be left to the big retailers, or a group like Toll Holdings. Toll though is a pure transport/logistics business and is looking to grow in Asia.
The big retailers would see the chance to not only buy the distribution operations of Sigma, but establish pharmacy chains of their own. Sigma supplies a number of chains, such as Amcal, Amcal Max and Guardian. API has Priceline and Soul Patts as its major chains.
The banks and financiers of Sigma’s on balance sheet and off balance sheet debt will have to approve the transaction with Aspen (the collapsed Allco Financial Group is a major off balance sheet creditor )
Meanwhile Healthscope, the country’s major private hospital operator, will open up its books on the $5.75 a share, $1.8 billion offer from TPG and Carlyle private equity groups.
Healthscope said last week it had received a takeover proposal of $5.75 per share, which valued the company at about $1.82 billion, from a private equity consortium.
The proposal was up from an earlier bid of $5.50 a share from the same consortium.
"The board has concluded that, based on their revised proposal and subject to negotiation of an appropriate confidentiality agreement, the members of the consortium will be granted the opportunity to conduct due diligence," the company said in a statement on Monday.
"It is expected that this process will take several weeks."
Healthscope continued to recommend shareholders take no action in relation to the indicative, non-binding proposal to acquire all of Healthscope’s issued capital by a scheme of arrangement.
Healthscope shares rose 1c to $5.25.
