API (ASX:API) share price heats up as bidding war begins

The company is receiving interest from a competitor…

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The Australian Pharmaceutical Industries Ltd (ASX: API) share price has come into focus today as the company received another takeover offer.

At the time of writing, API shares are swapping hands for $1.51, up 3.07%.

Details of the latest proposal

The API share price is on the move this morning following a bidding war to procure the pharmacy chain operator.

According to the release, Sigma Healthcare Ltd (ASX: SIG) has made a takeover offer to acquire 100% of API shares.

The unsolicited, indicative, non-binding and conditional proposal is for a combination of cash and scrip.

Under the terms, API shareholders would receive 35 cents in cash and 2.05 Sigma shares for each API share. Sigma shares are set at 59.5 cents apiece (based on the 24 September closing price), implying a value of $1.57 per API share.

However, any dividends API pays to shareholders following its full-year results, Sigma will reduce its cash component up to 5 cents.

In addition, Sigma also tabled a mix-and-match alternative to API shareholders. This allows an API shareholder to choose between maximising cash or Sigma scrip.

The new deal would see API hold a 48.5% stake in the combined company.

Recently, Wesfarmers Ltd (ASX: WES) increased their original offer to acquire API for $1.55 per share under a revised scheme arrangement. As such, the Wesfarmers proposal values API at approximately $764 million.

The API board noted that it will allow Sigma to conduct due diligence to facilitate a binding offer. Wesfarmers is also in the process of due diligence which could take a number of weeks to complete.

About the API share price

Over the past 12 months, API shares have gone on a rollercoaster ride, nonetheless registering gains of above 40%. Year-to-date, the company’s shares are up just a tad over 20%.

Based on today’s price, API presides a market capitalisation of roughly $721.74 million and has 492.6 million shares on its registry.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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