Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Australian Pharmaceutical Industries / Event-Driven

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<p>On the 12 July, wholesale and retail pharmacy health/beauty and lifestyle products operator <a href="https://www.smartkarma.com/entities/19399" target="_blank" data-smartkarma-citation="entities:19399:1" rel="noopener">Australian Pharmaceutical Industries (API AU)</a> (API) <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02394187-3A570533?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> an indicative, non-binding Offer from <a href="https://www.smartkarma.com/entities/wesfarmers-ltd" target="_blank" data-smartkarma-citation="entities:1104:1" rel="noopener">Wesfarmers Ltd (WES AU)</a> by way of a Scheme at $1.38/share,  a 20.5% premium to last close.  Separately, Wesfarmers has entered into an agreement with API's largest shareholder <a href="https://www.smartkarma.com/entities/washington-h-soul-pattinson-and-co-ltd" target="_blank" data-smartkarma-citation="entities:6054:1" rel="noopener">Washington H. Soul Pattinson and Co. Ltd (SOL AU)</a> (WHSP), such that WHSP will vote its 19.3% interest in favour of Wesfarmers' proposal, in the absence of a superior Offer.</p>
<p>There was a whiff of opportunism present, and the API board agreed and concluded in an announcement on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02400478-3A571605?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">29 July</a> that the proposal undervalued API, was not compelling, and was not in the best interest of shareholders. </p>
<h3>The New News</h3>
<p>After bumping the Offer by 12.3% to A$1.55/share, Wesfarmers and API entered into a <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02422163-3A575967?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">process deed</a> yesterday. A fully franked dividend of A$0.05/share is permitted, which if paid will reduce the cash consideration.</p>
<p>WHSP remains supportive and will vote its 19.3% in favour of the revised proposal.</p>
<p>API has granted Wesfarmers exclusive due diligence until the 16 October. The deal is also subject to ACCC clearance.</p>
<p>This remains a non-binding Offer, and we have seen two Aussie deals break in the past fortnight, reinforcing the country's moniker as the non-binding graveyard.</p>
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<p>More below the fold.</p>
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On the 12 July, wholesale and retail pharmacy health/beauty and lifestyle products operator Australian Pharmaceutical Industries (API AU) (API) announced an indicative, non-binding Offer from Wesfarmers Ltd (WES AU) by way of a Scheme at $1.38/share,  a 20.5% premium to last close.  Separately, Wesfarmers has entered into an agreement with API's largest shareholder Washington H. Soul Pattinson and Co. Ltd (SOL AU) (WHSP), such that WHSP will vote its 19.3% interest in favour of Wesfarmers' proposal, in the absence of a superior Offer.
There was a whiff of opportunism present, and the API board agreed and concluded in an announcement on the 29 July that the proposal undervalued API, was not compelling, and was not in the best interest of shareholders. 
The New News
After bumping the Offer by 12.3% to A$1.55/share, Wesfarmers and API entered into a process deed yesterday. A fully franked dividend of A$0.05/share is permitted, which if paid will reduce the cash consideration.
WHSP remains supportive and will vote its 19.3% in favour of the revised proposal.
API has granted Wesfarmers exclusive due diligence until the 16 October. The deal is also subject to ACCC clearance.
This remains a non-binding Offer, and we have seen two Aussie deals break in the past fortnight, reinforcing the country's moniker as the non-binding graveyard.


More below the fold.


Aussie Pharma (API AU): Wesfarmer's Sweetened (Yet Indicative) Offer

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<p><a href="https://www.smartkarma.com/entities/australian-pharmaceutical-industries-limited" target="_blank" data-smartkarma-citation="entities:19399:1" rel="noopener">Australian Pharmaceutical Industries (API AU)</a> is a vertically integrated wholesaler, franchise owner and retailer. API has received a revised non-binding indicative offer of A$1.55 per share from <a href="https://www.smartkarma.com/entities/wesfarmers-ltd" target="_blank" data-smartkarma-citation="entities:1104:1" rel="noopener">Wesfarmers Ltd (WES AU)</a>. The revised indicative offer of A$1.55 per share is a 35.4% premium to the unaffected price of A$1.145 (9 July).</p><p>The proposal also allows the payment of fully franked dividends of up to 5 cents per share, including any final dividend, declared for the financial year ended 31 August. The cash consideration of the offer will be reduced by the cash component of any dividends. The revised indicative offer is also a 12.3% bump to the original offer of A$1.38 per share received from Wesfarmers on 12 July, which was rejected by the Board on 29 July. </p><p>As announced in the first offer, Washington H. Soul Pattinson (WHSP), the largest shareholder who represents 19.3% of the outstanding shares, will vote in favour of Wesfarmers’ revised offer. WHSP has also granted a call option on its API shares in favour of Wesfarmers.  </p><p>The Board intends to unanimously recommend the revised offer subject to the entry into a binding scheme implementation deed following the completion of confirmatory due diligence that will conclude by 16 October. The revised offer is conditional on receiving regulatory approvals and clearance from the Australian Competition and Consumer Commission (ACCC). We think that the ACCC will not have issues with the transaction. </p><div class="content-highlight"><p>Wesfarmers aims to make API the foundation of its new Healthcare division, which will be used as the springboard to grow its presence in the health, wealth and beauty sectors. For API shareholders, we think that indicative revised offer is attractive compared to historical P/E multiples. The offer will prove attractive to shareholders who are looking for valuation certainty in an environment where API’s earnings continue to be impacted by COVID-19 related restrictions. At the last close price of A$1.48, the shares are trading at a 4.7% gross spread to the indicative revised offer.</p></div>

Australian Pharmaceutical Industries (API AU) is a vertically integrated wholesaler, franchise owner and retailer. API has received a revised non-binding indicative offer of A$1.55 per share from Wesfarmers Ltd (WES AU). The revised indicative offer of A$1.55 per share is a 35.4% premium to the unaffected price of A$1.145 (9 July).The proposal also allows the payment of fully franked dividends of up to 5 cents per share, including any final dividend, declared for the financial year ended 31 August. The cash consideration of the offer will be reduced by the cash component of any dividends. The revised indicative offer is also a 12.3% bump to the original offer of A$1.38 per share received from Wesfarmers on 12 July, which was rejected by the Board on 29 July. As announced in the first offer, Washington H. Soul Pattinson (WHSP), the largest shareholder who represents 19.3% of the outstanding shares, will vote in favour of Wesfarmers’ revised offer. WHSP has also granted a call option on its API shares in favour of Wesfarmers.  The Board intends to unanimously recommend the revised offer subject to the entry into a binding scheme implementation deed following the completion of confirmatory due diligence that will conclude by 16 October. The revised offer is conditional on receiving regulatory approvals and clearance from the Australian Competition and Consumer Commission (ACCC). We think that the ACCC will not have issues with the transaction. Wesfarmers aims to make API the foundation of its new Healthcare division, which will be used as the springboard to grow its presence in the health, wealth and beauty sectors. For API shareholders, we think that indicative revised offer is attractive compared to historical P/E multiples. The offer will prove attractive to shareholders who are looking for valuation certainty in an environment where API’s earnings continue to be impacted by COVID-19 related restrictions. At the last close price of A$1.48, the shares are trading at a 4.7% gross spread to the indicative revised offer.

Wesfarmers’ Revised Bid for API Gains Due Diligence Access

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<p>Back on the 14 December 2018, wholesale and retail pharmacy health/beauty and lifestyle products operator <a href="https://www.smartkarma.com/entities/19399" target="_blank" data-smartkarma-citation="entities:19399:1" rel="noopener"><strong>Australian Pharmaceutical Industries (API AU)</strong></a> (API) <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2995-02059816-3A507826?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> that it had become a substantial shareholder in key competitor <a href="https://www.smartkarma.com/entities/15966" target="_blank" data-smartkarma-citation="entities:15966:1" rel="noopener">Sigma Healthcare Ltd (SIG AU)</a> by purchasing 137.26mm shares, or 12.95%.</p>
<p>On the same day, it was <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2995-02059834-3A507836?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">made public</a> that API had made an indicative non-binding proposal to Sigma through a Scheme of Arrangement whereby Sigma shareholders would receive 0.31 shares of API and A$0.23 in cash for each share of Sigma held. The proposal was first tabled to the board back on 11 October 2018.</p>
<p><a href="https://www.smartkarma.com/profiles/travis-lundy" target="_blank" data-smartkarma-citation="accounts:25" rel="noopener">Travis Lundy</a> discussed the Offer in <em><a href="https://skr.ma/araq7" target="_blank" rel="noopener">API Tilts at Sigma Healthcare: Expect More</a></em> and <em><a href="https://skr.ma/szfi2" target="_blank" rel="noopener">Sigma Healthcare Market Update: Strategic Review Expects More</a>, </em>concluding the Offer was light. </p>
<p>Sigma thought so too and summarily <a href="https://www.asx.com.au/asxpdf/20190313/pdf/443fhtv2whrv40.pdf" target="_blank" rel="noopener">rejected</a> the Offer on the 13 March 2019 and terminated discussions. Sigma believed its future potential is on a standalone basis. Sigma also cited API's share price decline of &gt;15% since the 11 October announcement, implying a 12% decline in value for its shareholders; and also flagged the potential execution risk in regards to ACCC consent. $60mn in synergies from merging was, however, not disputed by Sigma.</p>
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<p>API said it had <a href="https://www.asx.com.au/asxpdf/20190313/pdf/443ftrffbvj16w.pdf" target="_blank" rel="noopener">closed its data room </a>and was reviewing its shareholding in Sigma.</p>
<p>API subsequently sold its stake in Sigma on the <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02185851-3A531484?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">16 December 2019</a>. </p>
<h3>The New News</h3>
</div>
<p>API has now <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02394187-3A570533?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> an indicative, non-binding Offer from <a href="https://www.smartkarma.com/entities/wesfarmers-ltd" target="_blank" data-smartkarma-citation="entities:1104:1" rel="noopener">Wesfarmers Ltd (WES AU)</a> by way of a Scheme at $1.38/share,  a 20.5% premium to last close.  </p>
<p>Separately, Wesfarmers has entered into an agreement with API's largest shareholder <a href="https://www.smartkarma.com/entities/washington-h-soul-pattinson-and-co-ltd" target="_blank" data-smartkarma-citation="entities:6054:1" rel="noopener">Washington H. Soul Pattinson and Co. Ltd (SOL AU)</a> (WHSP), such that WHSP will vote its 19.3% interest in favour of Wesfarmers' proposal, in the absence of a superior Offer.</p>
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<p>This looks done, and is trading accordingly. </p>
</div>
<div>
<p>More below the fold.</p>
</div>



Back on the 14 December 2018, wholesale and retail pharmacy health/beauty and lifestyle products operator Australian Pharmaceutical Industries (API AU) (API) announced that it had become a substantial shareholder in key competitor Sigma Healthcare Ltd (SIG AU) by purchasing 137.26mm shares, or 12.95%.
On the same day, it was made public that API had made an indicative non-binding proposal to Sigma through a Scheme of Arrangement whereby Sigma shareholders would receive 0.31 shares of API and A$0.23 in cash for each share of Sigma held. The proposal was first tabled to the board back on 11 October 2018.
Travis Lundy discussed the Offer in API Tilts at Sigma Healthcare: Expect More and Sigma Healthcare Market Update: Strategic Review Expects More, concluding the Offer was light. 
Sigma thought so too and summarily rejected the Offer on the 13 March 2019 and terminated discussions. Sigma believed its future potential is on a standalone basis. Sigma also cited API's share price decline of &gt;15% since the 11 October announcement, implying a 12% decline in value for its shareholders; and also flagged the potential execution risk in regards to ACCC consent. $60mn in synergies from merging was, however, not disputed by Sigma.

API said it had closed its data room and was reviewing its shareholding in Sigma.
API subsequently sold its stake in Sigma on the 16 December 2019. 
The New News

API has now announced an indicative, non-binding Offer from Wesfarmers Ltd (WES AU) by way of a Scheme at $1.38/share,  a 20.5% premium to last close.  
Separately, Wesfarmers has entered into an agreement with API's largest shareholder Washington H. Soul Pattinson and Co. Ltd (SOL AU) (WHSP), such that WHSP will vote its 19.3% interest in favour of Wesfarmers' proposal, in the absence of a superior Offer.

This looks done, and is trading accordingly. 


More below the fold.


API AU: The Hunter Turns The Hunted As Wesfarmers Makes A Move

IPO and L/S equity, 2015 Starmine top stock picker, Global Equity Research Ltd

Rickin Thakrar

IPO and L/S equity, 2015 Starmine top stock picker

<p>Below is a recap of the key Event-driven, IPO and placement research produced by the Global Equity Research team. This week we highlight Arun's analysis on the takeover deals for <a href="https://www.smartkarma.com/entities/1099" target="_blank" data-smartkarma-citation="entities:1099:1">Navitas Ltd (NVT AU)</a> and <a href="https://www.smartkarma.com/entities/7297" target="_blank" data-smartkarma-citation="entities:7297:1">Mindtree Ltd (MTCL IN)</a> and the valuation range for <a href="https://www.smartkarma.com/entities/20912" target="_blank" data-smartkarma-citation="entities:20912:1">Delta Electronics Thai (DELTA TB)</a> . In addition, Arun recommends taking the <a href="https://www.smartkarma.com/entities/23649" target="_blank" data-smartkarma-citation="entities:23649:1">Gds Holdings (Adr) (GDS US)</a> placement while recommending the deal for <a href="https://www.smartkarma.com/entities/374" target="_blank" data-smartkarma-citation="entities:374:1">MYOB Group Ltd (MYO AU)</a> and contends investors may need to be patient for the rejected <a href="https://www.smartkarma.com/entities/15966" target="_blank" data-smartkarma-citation="entities:15966:1">Sigma Healthcare (SIG AU)</a> deal. Venkat looks into the bankruptcy arbitrage situation for <a href="https://www.smartkarma.com/entities/18378" target="_blank" data-smartkarma-citation="entities:18378:1">P G &amp; E Corp (PCG US)</a> and contends PG&amp;E has no equity value due to pending litigation risks. Finally, Arun initiates on the IPO of Chinese e-commerce company <a href="https://www.smartkarma.com/entities/27992" target="_blank" data-smartkarma-citation="entities:27992:1">Ruhnn Holding Ltd (RUHN US)</a></p><p>Best of luck for the new week - Arun, Venkat and Rickin</p>

Below is a recap of the key Event-driven, IPO and placement research produced by the Global Equity Research team. This week we highlight Arun's analysis on the takeover deals for Navitas Ltd (NVT AU) and Mindtree Ltd (MTCL IN) and the valuation range for Delta Electronics Thai (DELTA TB) . In addition, Arun recommends taking the Gds Holdings (Adr) (GDS US) placement while recommending the deal for MYOB Group Ltd (MYO AU) and contends investors may need to be patient for the rejected Sigma Healthcare (SIG AU) deal. Venkat looks into the bankruptcy arbitrage situation for P G &amp; E Corp (PCG US) and contends PG&amp;E has no equity value due to pending litigation risks. Finally, Arun initiates on the IPO of Chinese e-commerce company Ruhnn Holding Ltd (RUHN US)Best of luck for the new week - Arun, Venkat and Rickin

Last Week in GER Research: Navitas, Mindtree, PG&E, Delta Electronics, GDS, Myob, Sigma and Ruhnn

<p>On Wednesday, <a href="https://www.smartkarma.com/entities/15966" target="_blank" data-smartkarma-citation="entities:15966:1">Sigma Healthcare (SIG AU)</a> rejected an indicative takeover offer from rival <a href="https://www.smartkarma.com/entities/19399" target="_blank" data-smartkarma-citation="entities:19399:1">Australian Pharma Industries (API AU)</a>. Shareholders were disappointed with the news, with Sigma’s shares closing 12.3% lower at A$0.54 per share. API shares fared better and fell 3.6% to A$1.35 each.</p><div class="content-highlight"><p>We believe Sigma’s board were left with the tough choice of accepting a lowball offer or improving the existing business and riding out the inevitable share price fall. By rejecting the API bid, the Sigma board made the difficult but right choice, in our view. While further downside risk to the share price is limited, we caution that shareholders require patience as the road to share price recovery will be long.</p></div>

On Wednesday, Sigma Healthcare (SIG AU) rejected an indicative takeover offer from rival Australian Pharma Industries (API AU). Shareholders were disappointed with the news, with Sigma’s shares closing 12.3% lower at A$0.54 per share. API shares fared better and fell 3.6% to A$1.35 each.We believe Sigma’s board were left with the tough choice of accepting a lowball offer or improving the existing business and riding out the inevitable share price fall. By rejecting the API bid, the Sigma board made the difficult but right choice, in our view. While further downside risk to the share price is limited, we caution that shareholders require patience as the road to share price recovery will be long.

Sigma Healthcare (SIG AU): Rejecting the API Bid Is the Difficult but Right Choice

Australia

Australian Pharmaceutical Industries Limited is a pharmaceutical support company which provides wholesale distribution of pharmaceutical and related products to pharmacies, hospitals and doctors. The Company also provides various retail support services and financial services to pharmacies along with distributing dental and related products to dental practices.

Australian Pharmaceutical Industries (API AU)

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Australian Pharmaceutical Industries (API AU)

Aussie Pharma (API AU): Wesfarmer's Sweetened (Yet Indicative) Offer

Trading at a 5.8%/15.8% gross/annualised spread, assuming mid-Feb completion. But it's not a super liquid arb situation. Plus this remains a non...

David Blennerhassett

Wesfarmers’ Revised Bid for API Gains Due Diligence Access

The revised indicative offer of A$1.55 per share is fair. At the last close price of A$1.48, the shares are trading at a 4.7% gross spread to the...

Arun George

API AU: The Hunter Turns The Hunted As Wesfarmers Makes A Move

With SOL's backing, you realistically have a $1.38/share floor, with the possibility of another bidder emerging. You could position yourself around...

David Blennerhassett

Last Week in GER Research: Navitas, Mindtree, PG&E, Delta Electronics, GDS, Myob, Sigma and Ruhnn

Below is a recap of the key Event-driven, IPO and placement research produced by the Global Equity Research team. This week we highlight Arun's...

Rickin Thakrar

Sigma Healthcare (SIG AU): Rejecting the API Bid Is the Difficult but Right Choice

On Wednesday, Sigma Healthcare (SIG AU) rejected an indicative takeover offer from rival Australian Pharma Industries (API AU). Shareholders were...

Arun George

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