higher bid from symbiom possible this week, page-2

market now seems to be discounting higher bid - Symbion will need to move quickly

article

"SIGMA is looking to formalise a $643 million takeover offer for rival drug wholesaler Australian Pharmaceutical Industries by the end of this week.

The bid will be based on the informal, highly conditional $2.50-a-share approach Sigma made last week. This prompted a flurry of activity around API, the NSW-based pharmacy drug distributor, hospital medical supplier and retail chemist.

The two companies have agreed on the need for rationalisation across the industry and for a merged Sigma-API entity to lead it. Sigma hopes to secure API's board recommendation in the next two days so it can begin an investigation of the company's financial situation. In July, it emerged that API had lost track of $17 million following the introduction of a new IT system. API has since spent $4 million trying to get to the bottom of the problem.

API's shares reached a high last month of $2.71 — just before Sigma made its latest approach last week — as takeover speculation underpinned the stock. API early last month rejected as "inadequate" an offer of $2.20 a share.

With Sigma indicating it will walk away if its latest approach is rejected, and another bidder unlikely to emerge, the market yesterday marked API's shares down a further 2¢ to $2.54, just shy of where the Melbourne-based drug maker and distributor is pitching its offer.

Sigma has been buoyed by API's biggest shareholder, Washington H. Soul Pattinson, indicating in the past few days it will accept $2.50 for its 21 per cent stake if no other bidder comes forward.

Sigma managing director Elmo de Alwis said of the talks yesterday: "Both companies seem to be interested in some form of rationalisation and believe there are certainly ways of developing shareholder value."

An agreed bid would prompt a joint approach to the Australian Competition and Consumer Commission, which has expressed concerns about the hold a merged Sigma-API would have in the wholesaler market.

An API spokesman said: "The board will take the approach of going through the process properly, and whilst there have been discussions, there is no (formal) bid currently on offer."

API had noted the position of its biggest investor but said it had a responsibility to all shareholders when considering a likely takeover proposal.