Priceline Pharmacy owner Australian Pharmaceutical Industries (ASX: API) will open its books to a second suitor after Sigma Healthcare (ASX: SIG) offered a new merger deal over the counter with a mix of cash and SIG stock.
API's board has determined Sigma's proposal, at an indicative value of $1.57 per share that would see API shareholders receive a 48.8 per cent stake in the combined entity, is superior to an existing offer from Wesfarmers (ASX: WES) that is currently under due diligence.
Based on Sigma's previous closing price the latest deal is worth just shy of $774 million, representing a more than 1 per cent lift on the Wesfarmers offer which is entirely cash-based.
Under the new proposal API shareholders have been offered 2.05 SIG shares for every API share held, plus $0.35 cash, with flexibility on offer to elect a maximum cash or a maximum shares consideration.
The cash component will however be reduced by any final dividend paid for the end of the financial year ended 31 August 2021, with Sigma intending to pay for the merger through new debt.
Sigma estimates around $45 million per annum in cost synergies from the combination, which it believes would bring significant value creation opportunities to both companies.
Any deal will still depend on the outcome of due diligence by Sigma, as well as regulatory approvals and the unanimous recommendation of the API board and a commitment from all API directors to vote any API shares they respectively hold or control in favour of the transaction.
Washington H. Soul Pattinson (ASX: SOL), which holds 19.3 per cent of API shares, has previously indicated its intentions to vote in favour of the competing Wesfarmers offer.
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