Sigma chief set for API battleElizabeth Colman14oct06SIGMA...

Sigma chief set for API battle
Elizabeth Colman
14oct06

SIGMA Pharmaceuticals managing director Elmo de Alwis is bracing for battle.

On Monday he expects to discover how Australian Pharmaceutical Industries views his below-market takeover bid - amid market speculation that the offer will be rejected.

He is hurriedly preparing a pitch to the Australian Competition and Consumer Commission which he hopes will bless the deal - despite the competition watchdog twice throwing out a merger between API and Sigma.

Mr de Alwis conceded yesterday that API shareholders would take convincing after his $2.20 a share offer last week.

API shares have climbed steadily this month, but closed down 2c at $2.71 yesterday.

"There's a gap (between the market and offer price) and that is an issue, because it causes an issue to API," Mr de Alwis said.

"I'd like to think that with the shareholders at API there is a recognition of the synergies and the value we can create with the two companies. We are waiting on a response that hopefully we will have next week."

His reason for the discounted offer is simple. "We think that's what the company is worth," he said. "The market price is a different price altogether. Ours is a valuation based on analysts' consensus with the 33 per cent premium. Market prices can be for all sorts of reasons. We're saying this is what it is worth to us. It's what we believe is a fair price. If someone thinks it's of more value to them than it is to us, then they'll bid more."

The ACCC has begun an informal review of Sigma's offer but is waiting for a submission from the company. Sigma is expected to argue that, with the advent of DHL, a fourth force exists in the pharmacy distribution industry to keep competition active. In addition, Symbion Health Ltd, created in 2002 from the demerger of Mayne Group, presents a more viable competitive force than when API and Sigma proposed a merger previously.

It is also understood that Symbion will emphasise an agreement between the Pharmacy Guild and the federal Government not to increase levies. Symbion chief executive Robert Cooke has not ruled out bidding for API.

A recent computer glitch which forced API to write off $22 million had also made it difficult to put a price on the company, Mr Cooke has said.