re: 2.60 l think the bidding is just starting, with Symbion,...

re: 2.60 l think the bidding is just starting, with Symbion, Woolies and a foreign bidder next off the ranks.

as the previous board mismanagement fades and new value adding decisions are made there is a lot more potential here.

article;

"Is it possible for a company board on the end of a takeover to play the high moral card (in corporate terms) after misplacing, losing, or not having at all, $17.2 million dollars in revenue; fired its CEO and its chief financial officer over this and other factors, and then mishandled breaking the news of an 'approach' from another company?
Tough question really, but when you're the board of Australian Pharmaceutical Industries (ASX: API.ax) the question is very germane to the future of the group.

The board (including former Federal Health Minister, Dr Michael Woolridge) hasn't inspired confidence at all just on the basis of the botched implementation of new computer systems, the fact that $17.2 million went missing during this time, that first half earnings in 2007 will be lower because of ongoing costs associated with the computer and revenue problems and that the CEO, Jeff Sher, was allowed to depart with a confidentiality agreement in place which prevents shareholders being informed just what happened in the fullest detail.

So after rival distributor, Simga lobbed its second attempt in a couple of years, to takeover API, it was understandable.

Here was a company whose board and management had lost the trust of the market: where the share price fell to a low of $1.63, below the NTA of $1.66 per share and where the price strength in the past fortnight has been due to the company botching informing the market of these 'approaches'.

By 'approaches it was though a bid, but it seems the company had been really approached for parts of the business: or that was an explanation from API.

So it was no wonder a wondering Sigma suggested an 'indicated $2.20 a share' when the price was $2.36 on Thursday. That was down 3c despite the Sigma announcement coming 35 minutes from the end of trading.

Sigma argued that that was a premium to levels before the speculation started but it's only an opening gambit. At Friday's close of $2.36 API was valued at $607 million: Sigma's 'offer' values API at around $565 million.

Sigma probably though that if the ACCC and API's major shareholder say yes, there's a chance of getting API cheaply and not paying a full premium for the extra market share.

And after all, Sigma's management is cleverer than API: it doesn't lose revenue and CEO Elmo de Alwis is reputed to the smartest bloke in the drug distribution and pharmacy trade in this country.

And anyway the bid will be decided by API's major shareholder, Washington Soul Pattinson (which owns 21.1 per cent (that's a nice $120 million plus ready to be claimed ). Soul Patts has been slowly rationalising itself in recent years and the cash might come in handy elsewhere.

But the ACCC will be the major barrier: It knocked back Sigma's first attempt several years ago but there's a fourth operator in the drug and chemist distribution business in DHL-Exel which has been aggressively chasing market share, so the way might be clear for a successful bid, at a higher price.

So Friday afternoon, a couple of hours after Sigma's announcement went to the market, API posted its response.

"Sigma Pharmaceuticals Limited (Sigma) has today announced an unsolicited highly conditional takeover proposal for Australian Pharmaceutical Industries (ASX: API.ax) . The Board of API will evaluate the Sigma proposal with its corporate and legal advisers and provide advice to API shareholders as soon as practicable.

"The Sigma proposal is highly conditional and proposes a value for API shares which is at a discount to API's current share trading price.

"The company strongly advises that API shareholders should take no action with respect to the Sigma proposal at this stage. The API Board will advise of its recommendations once it has had an opportunity to consider the Sigma proposal."

That's all about the API mob could say: they can't defend it on the basis of price, earnings past or future or any other of the normal criteria. Credibility is needed from the market and that's something in short supply around API at the moment.

Assuming a tick from the ACCC it's only a matter of price really.

It does make you wonder though why Woolworths or Coles who both want to get into the Pharmacy game, doesn't overbid, grab the pharmacy side and sell the distribution to Sigma or DHL?