a couple of articles

http://www.theaustralian.com.au/business/industry-sectors/sigma-pharmaceuticals-scouts-for-higher-bidders/story-e6frg97f-1225870762818

Sigma Pharmaceuticals scouts for higher bidders


Rebecca Urban From: The Australian May 25, 2010 12:00AM Increase Text Size Decrease Text Size Print Email Share Add to Digg Add to del.icio.us Add to Facebook Add to Kwoff Add to Myspace Add to Newsvine What are these?
ADVISERS to takeover target Sigma Pharmaceuticals are expected to canvas potential buyers for the troubled business in the hope of soliciting a superior offer to a $700 million bid received last week.

Sigma yesterday confirmed that South Africa's Aspen Pharmaceuticals is behind a 60c-a-share offer to buy the company, which has struggled since unveiling a $389m loss earlier this year.

While Sigma's board is considering the proposal, it is understood that other offshore groups and private equity firms will be sounded out regarding their intentions.

Industry sources have suggested that Indian pharmaceutical companies, which have been increasingly eyeing assets in Western countries, could be interested in Sigma's drug manufacturing and distribution channel.

The Bangalore-based Strides Arcolab recently bid for the ASX-listed generics player Ascent Pharmahealth, while India's largest drug company, Ranbaxy Laboratories, has stated aspirations to expand its existing footprint in Australia.

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Related Coverage
Sigma caught over a barrel Herald Sun, 6 hours ago
Aspen named as Sigma suitor Adelaide Now, 1 day ago
Aspen's remedy to cure Sigma The Australian, 1 day ago
Offshore buyer has Sigma in its sights The Australian, 3 days ago
Aspen, Ranbaxy behind Sigma bid The Australian, 4 days ago
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Domestic healthcare groups, including Australian Pharmaceutical Industries, Primary Health Care and the unlisted iNova -- some of which have been previously linked to the purchase of parts of the Sigma business -- could also be considered potential acquirers, as could private equity, which has strong links to the sector.

Sigma, which has been ordered to sell assets worth $90m after breaching the covenants of its banking facility, is advised by Lazard, whose advisory arm is headed by John Wylie.

The prominent Melbourne-based banker was previously an adviser to Coles Group, where he was credited with devising the retailers' defensive strategy, which included inviting offers for the entire company as well as separate bids for its components.

More recently, he advised Transurban on its rejection of a privatisation proposal.

But soliciting a higher offer for Sigma might not be easy, as several analysts have pointed out. UBS described Sigma as "a renovators' delight", but warned that the bid might not improve.

Credit Suisse noted a significant uncertainty surrounding future earnings, following recently announced Pharmaceutical Benefits Scheme price cuts to generics and ongoing discounting and competition.

Sigma has urged shareholders to take no action on Aspen's bid. Its shares edged up 1c to 49c.

http://www.heraldsun.com.au/business/sigma-caught-over-a-barrel/story-e6frfh4f-1225870954971


Sigma caught over a barrel


George Lekakis From: Herald Sun May 25, 2010 10:47AM Increase Text Size Decrease Text Size Print Email Share Add to Digg Add to del.icio.us Add to Facebook Add to Kwoff Add to Myspace Add to Newsvine What are these?
SIGMA Pharmaceuticals shareholders face capital losses of at least $500 million if they accept the conditional takeover offer from South African drugs maker Aspen Pharmacare.

Aspen is offering to buy out Sigma's 1.18 billion shares at 60 a unit, which values the target company at $710 million.

Aspen is promoting its bid as a $1.49 billion offer on the basis that it will also assume responsibility for $785 million of debt on Sigma's balance sheet.

With its senior management in disarray and chairman John Stocker poised to leave the company, Sigma is vulnerable to any predator at the moment.

Institutional shareholders such as BlackRock, MAM and Orbis have almost written off their investments in the company, and according to most analysts they seem only concerned with minimising their losses.

Sigma's share price closed at 49 yesterday -- a big discount to the Aspen offer.

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Most analysts said the discount indicated that investors were sceptical about the prospects for the company turning around its operating performance in the near term.

"They've got a vacuum at management and board levels and the company's banks are mandating that it winds down its presence in the market through asset sales," said one leading Melbourne analyst.

"If there's not another bid in the offing then the share price is likely to fall away from its current levels."

But Bell Potter head of equities research Peter Quinton believes the discount reflects much deeper concerns about Sigma's balance sheet.

"The discount in the share price to Aspen's offer is because the market is worried that during due diligence they might find something they don't like which could lead to the bid being withdrawn," he said. "The company is a shambles."

Sigma chief financial officer Mark Smith left the company on May 13, leaving shareholders to speculate on whether the group's balance sheet will deteriorate further in the coming months.

Of most concern are potential liabilities stemming from Sigma's financing deals, which included an arrangement with the collapsed Babcock & Brown.

Moreover, it was revealed last month that the Australian Taxation Office was investigating whether pharmacists tied to Sigma owed tax on gifts and other rewards they received from the drugs maker.

Sigma's bankers have also put clamps on the business, insisting that it offload some core operations to fund $90 million of debt due at the end of November.

It is an anarchic scenario which should play out in Aspen's favour.

Even though Sigma has little going for it in the near term some may be loathe to accept an all-cash offer which left them with losses running into the tens of millions.