The Australian Pharmaceutical Industries (ASX: API) share price is rising after Sigma Healthcare Ltd (ASX: SIG) competes with Wesfarmers Ltd (ASX: WES) to take over API.
API is best known for being the parent company of Priceline Pharmacy and Soul Pattinson Chemist, ClearSkincare and others. The company is more than 100 years old.
Battle to take over API
Wesfarmers has been making moves to try and take over API since July 2021 with an initial offer of $1.38 per share which was rejected.
On 16 September 2021 Wesfarmers took another swing with an offer of $1.55 per share. The API board said that they intended to unanimously recommend the revised offer to shareholders. As long as no better offer came along, of course.
Sigma makes an offer for API
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 Sigma shares for each API share. This is a value of $1.57 per API share, based on the closing Sigma share price of $0.595 yesterday.
There will also be a “mix and match” option, between maximum cash or maximum shares, if the deal goes ahead.
The offer is in the very early stages and is subject to a laundry list of conditions including due diligence and regulatory approval. Of course, it will also need to be recommended by the API board and accepted by API shareholders.
Sigma synergies
Under this proposed offer, API shareholders would own around 48.8% of the merged company. Sigma believes that merging API into Sigma has benefits to API shareholders, with synergies between the two companies.
Sigma said that it has identified at least $45 million per annum of potential cost synergies by combining the two companies.
What is API going to do?
The API board said that the Sigma offer could represent a more favourable offer to API shareholders.
The board decided to allow Sigma to go ahead with its due diligence. This is along side the offer to Wesfarmers to perform its due diligence.
API noted that there is no guarantee that this potential deal with Sigma will go ahead.
There is also no guarantee that Wesfarmers will up its offer after this, we will just have to wait and see.
Final thoughts on the API share price
The API share price is up by over 5% to $1.54 at the time of writing. This is 1.9% lower than the Sigma offer value of $1.57 per share.
However the Sigma share price has also risen and is up over 3%. This is noteworthy as the Sigma offer includes Sigma shares.
Of course, we still have to wait and see what Wesfarmers might come back to the table with.
I’m very interested to see how this plays out. However, I am not a buyer of API with these takeover offers being priced in. I’m looking for other ASX growth shares opportunities.
