API flags due diligence in Sigma takeover

Sigma PharmaAustralian Pharmaceutical Industries expects to sign a deal to commence due diligence in its takeover bid for Sigma Healthcare.

In early December, API had offered to buy Sigma for $727 million, where shareholders of the pharmacy operator would receive 0.31 API shares and 23 cents in cash for each of their shares.

“We anticipate signing a non-disclosure agreement shortly that will then allow a due diligence process to commence,” Mark Smith, the drug distributor’s chairman, said on Wednesday.

At its AGM on Wednesday API reported that in the 2018 financial year, underlying net profit after tax was $54.7 million, up 0.9 per cent on the previous year.

Priceline Pharmacy network sales grew by 2.1 per cent to $2.1 billion. The network grew by 13 stores in the year to finish on 475 stores.

“It is worth noting that these result were achieved in a year where we saw the statutory price changes to the Pharmaceutical Benefits Scheme (PBS)  and exclusive direct distribution arrangements reduce our gross profit by more than $10 million – far above the long-term trend and the impact on earning was well recovered in the circumstances,” API CEO Richard Vincent told shareholders.

Vincent said that while attention has been on the acquisition of Clearskincare and the proposed Sigma merger, it is important to note that the business has established sustainable positions in both pharmaceutical wholesaling and in retailing.

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