The Australian Pharmaceutical Industries Ltd (ASX: API) share price has moved higher today after the pharmacy distributor entered into a Scheme of Implementation Deed with Wesfarmers Ltd (ASX: WES).
The API share price is up 2.69% to $1.52. Meanwhile, the Wesfarmers share price is down 0.48% to $60.04
A Scheme of Implementation Deed, or SID, is an agreement by the bidder and target that sets out key conditions for the bidder to acquire all of the target’s shares.
The $1.55 cash per share offer values API at $763.6 million and has been unanimously recommended by the API board.
What are the details of the SID?
The entry of the SID is the result of Wesfarmers completing due diligence announced on September 16.
Subsequently, Wesfarmers bought a 19.3% stake in API to fend off a rival bid from Sigma Healthcare Ltd (ASX: SIG).
Current API shareholders will be eligible to receive $1.55 per share minus any fully franked dividends up to a maximum value of 5 cents per share.
API has already declared a final dividend of 2 cents per share. Therefore at this stage, shareholders would receive the 2 cents per share dividend and $1.53 per share from Wesfarmers.
Commenting on the deal, Wesfarmers Managing Director Rob Scott said:
“Wesfarmers continues to see opportunities to invest in and strengthen the competitive position of API and its community pharmacy partners by expanding ranges, improving supply chain capabilities and enhancing the online experience for customers.”
What next for API shareholders?
A Scheme meeting of API shareholders is expected in the first three months of 2022.
However, the offer remains subject to shareholder, court and regulatory approvals.
Each API director intends to vote in favour of the deal in the absence of a superior offer and an independent expert concluding the Scheme in the best interests of shareholders.
Wesfarmers outwits Sigma
Sigma’s last-minute $1.57 per share bid was a two-cent per share premium to Wesfarmers.
However with Wesfarmers being the largest shareholder, in addition to its all-cash offer, Sigma’s small chance of winning has been eliminated.
As a result, the API board has recommended the Wesfarmers offer. It looks like the deal is largely complete and API will be consolidated into Wesfarmers next year.
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