July 6 (Bloomberg) -- Aspen Pharmacare Holdings Ltd. will reduce its A$707 million ($596 million) takeover offer for Sigma Pharmaceuticals Ltd. after reviewing the Australian company’s accounts, a person familiar with the matter said.
Aspen, Africa’s largest drugmaker, has told Sigma it wants to continue the review after an exclusivity period expired yesterday, the Melbourne-based company said in a statement today. A plan by Sigma shareholders to sue the company is also weighing on the bid and price, said Stuart Roberts, a health-care analyst at Southern Cross Equities Ltd. in Sydney.
Sigma shares have remained below Durban, South Africa-based Aspen’s indicative offer on May 21 of 60 Australian cents a share, which includes Aspen assuming Sigma’s net debt of A$785 million. Sigma last month said it may miss its annual profit forecast after announcing resignations by three top executives following a record loss in March that triggered a 48 percent one-day plunge in the stock.
“The Australian market was signaling Aspen will come with a downward-revised offer,” Mark Wadley, an analyst at Credit Suisse Standard Securities, said by phone from Johannesburg yesterday.
Discussions hinging on price are continuing, said the person familiar with the matter, who declined to be identified as the negotiations are private.
Sigma, Australia’s biggest drugs distributor, closed unchanged at 39.5 Australian cents in Sydney trading today, after falling as much as 3.8 percent. Aspen, which fell 4.3 percent last week, rose 0.3 percent to 75.16 rand at 9:06 a.m. in Johannesburg today.
Ian Smith, an external spokesman for Sigma, didn’t return a call and text message today seeking comment. The company will consider other opportunities and recommends that shareholders take no action, it said in today’s statement. Shauneen Beukes, an external spokeswoman for Aspen, yesterday said the company declined to comment.
Aspen is “uneasy” about bearing the risk of a possible lawsuit against Sigma, the Australian Financial Review reported June 24, without saying where it got the information.
A group of Sigma’s shareholders plan to sue the company for breach of continuous disclosure and misleading or deceptive conduct, said Ben Phi, a senior associate at Slater & Gordon Ltd., the law firm coordinating the class action. The shareholders will seek damages from Sigma, Phi said by telephone from Melbourne today, declining to say how much.
No ‘Reasonable Basis’
“We’re saying that basically from about September last year when Sigma reconfirmed its earnings guidance, that it did so without a reasonable basis,” Phi said. “The conditions in the marketplace in which it was operating, as well as its first-half results, indicated that it really was not in a position to achieve the guidance that it was providing.”
The “vast bulk” of Sigma’s institutional shareholders are participating in the action, Phi said by telephone today. The company hasn’t filed its papers yet and hasn’t spoken to either Sigma or Aspen about the suit, Phi said.
“Obviously it’s going to be weighing on the minds of the Aspen people, and if they can use it to leverage a better bid, good luck to them,” said Roberts at Southern Cross Equities. “I suspect that’s what they’re trying to do now. If they were really freaked, they would have walked today.”
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