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.

Event-Driven

Australian Pharmaceutical Industries / Event-Driven

<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 non-binding indicative offer from <a href="https://www.smartkarma.com/entities/sigma-healthcare-ltd" target="_blank" data-smartkarma-citation="entities:15966:1" rel="noopener">Sigma Healthcare (SIG AU)</a>. Sigma is offering cash and scrip comprising A$0.35 cash and 2.05 Sigma shares per API share. Sigma’s offer has an implied value of A$1.57 per share (based on Sigma’s share price on 24 September) and A$1.58 per share (Sigma’s last close price). Sigma’s offer of A$1.57 per share is a 37.1% premium to the unaffected price of A$1.145 (9 July prior to Wesfarmers' first proposal).  </p><p>As a reminder on 16 September, API revealed 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 Board announced an intention 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 end by 16 October. However, the Board has determined that the Sigma offer is superior and has decided to grant Sigma due diligence access.   </p><p>Sigma’s offer for API is just the latest M&amp;A round between these two names. In a role-reversal in October 2018, API bought a 12.95% stake in Sigma and followed it up with a scrip and cash bid worth A$0.686 per Sigma share at that time. Sigma rejected API’s bid as it did not reflect the long-term value of the business which prompted API to dispose of its stake.</p><p>Sigma argues that its offer is superior to Wesfarmers’ offer as API shareholders can benefit from revenue diversification, significant synergies (target of A$45 million annual cost synergies), greater scale (the combined entity will be Australia’s largest pharmaceutical wholesaler) and franking credits. Sigma’s proposal requires clearance from the Australian Competition and Consumer Commission (ACCC). API was said to have ensured clearance from the ACCC was possible when it made its failed bid for Sigma in 2018.  </p><div class="content-highlight"><p>Clearly, the implied value of Sigma’s offer is less certain and will fluctuate based on Sigma’s share price. We think that there is another round to this contested takeover battle. At the last close price of A$1.51, API’s shares are trading at a -2.6% discount to Wesfarmers’ cash offer of A$1.55 and a -4.4% discount to Sigma’s offer of A$1.58 (based on Sigma’s last close price).</p></div>

Australian Pharmaceutical Industries (API AU) is a vertically integrated wholesaler, franchise owner and retailer. API has received a non-binding indicative offer from Sigma Healthcare (SIG AU). Sigma is offering cash and scrip comprising A$0.35 cash and 2.05 Sigma shares per API share. Sigma’s offer has an implied value of A$1.57 per share (based on Sigma’s share price on 24 September) and A$1.58 per share (Sigma’s last close price). Sigma’s offer of A$1.57 per share is a 37.1% premium to the unaffected price of A$1.145 (9 July prior to Wesfarmers' first proposal).  As a reminder on 16 September, API revealed a revised non-binding indicative offer of A$1.55 per share from Wesfarmers Ltd (WES AU). The Board announced an intention 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 end by 16 October. However, the Board has determined that the Sigma offer is superior and has decided to grant Sigma due diligence access.   Sigma’s offer for API is just the latest M&amp;A round between these two names. In a role-reversal in October 2018, API bought a 12.95% stake in Sigma and followed it up with a scrip and cash bid worth A$0.686 per Sigma share at that time. Sigma rejected API’s bid as it did not reflect the long-term value of the business which prompted API to dispose of its stake.Sigma argues that its offer is superior to Wesfarmers’ offer as API shareholders can benefit from revenue diversification, significant synergies (target of A$45 million annual cost synergies), greater scale (the combined entity will be Australia’s largest pharmaceutical wholesaler) and franking credits. Sigma’s proposal requires clearance from the Australian Competition and Consumer Commission (ACCC). API was said to have ensured clearance from the ACCC was possible when it made its failed bid for Sigma in 2018.  Clearly, the implied value of Sigma’s offer is less certain and will fluctuate based on Sigma’s share price. We think that there is another round to this contested takeover battle. At the last close price of A$1.51, API’s shares are trading at a -2.6% discount to Wesfarmers’ cash offer of A$1.55 and a -4.4% discount to Sigma’s offer of A$1.58 (based on Sigma’s last close price).

API in Role Reversal as Its Receives a Bid from Sigma

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

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<p>Back on the 12 July, wholesale and retail pharmacy 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 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>The proposal appeared opportunistic and the API board agreed (with that idea) and rejected the proposed Offer 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> on grounds it undervalued API, was not compelling, and was not in the best interest of shareholders. </p>
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<p>Wesfarmers and API subsequently 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> on the 16 September after Wesfarmers bumped the Offer by 12.3% to A$1.55/share. A fully franked dividend of A$0.05/share is permitted, which will reduce the cash consideration if paid. WHSP remains supportive.</p>
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<p>API granted Wesfarmers exclusive due diligence until the 16 October. The proposal is also subject to ACCC clearance.</p>
<h3>The New News</h3>
<p>API has now <a href="https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02426356-3A576689?access_token=83ff96335c2d45a094df02a206a39ff4" target="_blank" rel="noopener">announced</a> it has received a non-binding proposal from <a href="https://www.smartkarma.com/entities/sigma-healthcare-ltd" target="_blank" data-smartkarma-citation="entities:15966:1" rel="noopener">Sigma Healthcare (SIG AU)</a>. API shareholders would receive an implied A$1.57/share under Sigma’s cash-and-stock proposal. A similar franked dividend, to the one in the Wesfermers' proposal, is also permitted. </p>
<p>This is the third attempt by Australia's two largest pharmaceutical distributors to merge: the first was shot down by the ACCC in 2002, and the second was rejected by Sigma (when API was the acquiror) in 2019.</p>
<p>Sigma has been afforded confirmatory due diligence - which appears will take place after Wesfarmers' exclusive due diligence, although the wording in today's announcement is unclear. </p>
<p>Wesfarmers proposal is cleaner as an all-cash proposal  - and WHSP is a willing seller. Yet an API/Sigma tie-in would amalgamate key pharmacy brands (Amcal, Guardian, and Priceline) into one entity. It remains to be seen whether the ACCC's stance has changed from 19 years ago.</p>
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<p>More below the fold.</p>
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Back on the 12 July, wholesale and retail pharmacy 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 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.


The proposal appeared opportunistic and the API board agreed (with that idea) and rejected the proposed Offer on the 29 July on grounds it undervalued API, was not compelling, and was not in the best interest of shareholders. 

Wesfarmers and API subsequently entered into a process deed on the 16 September after Wesfarmers bumped the Offer by 12.3% to A$1.55/share. A fully franked dividend of A$0.05/share is permitted, which will reduce the cash consideration if paid. WHSP remains supportive.

API granted Wesfarmers exclusive due diligence until the 16 October. The proposal is also subject to ACCC clearance.
The New News
API has now announced it has received a non-binding proposal from Sigma Healthcare (SIG AU). API shareholders would receive an implied A$1.57/share under Sigma’s cash-and-stock proposal. A similar franked dividend, to the one in the Wesfermers' proposal, is also permitted. 
This is the third attempt by Australia's two largest pharmaceutical distributors to merge: the first was shot down by the ACCC in 2002, and the second was rejected by Sigma (when API was the acquiror) in 2019.
Sigma has been afforded confirmatory due diligence - which appears will take place after Wesfarmers' exclusive due diligence, although the wording in today's announcement is unclear. 
Wesfarmers proposal is cleaner as an all-cash proposal  - and WHSP is a willing seller. Yet an API/Sigma tie-in would amalgamate key pharmacy brands (Amcal, Guardian, and Priceline) into one entity. It remains to be seen whether the ACCC's stance has changed from 19 years ago.


More below the fold.


Aussie Pharma (API AU): Sigma's Rival Bid (Just) Edges Wesfarmers

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<p>This insight provides a quick summary of gross/annualised (where possible) spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and how those spreads have changed over the last week; plus the next hard events over the coming weeks.</p>
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<p>I number 36, mostly firm, deals around the region.</p>
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<p>More below the fold.</p>
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This insight provides a quick summary of gross/annualised (where possible) spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and how those spreads have changed over the last week; plus the next hard events over the coming weeks.


I number 36, mostly firm, deals around the region.


More below the fold.


Asia-Pac Weekly Risk Arb Summary: Sydney Airport, Aussie Pharma, Milton, Shinsei Bank

<div>
<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>
</div>
<div>
<p>More below the fold.</p>
</div>


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

<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

Australia

Wesfarmers Ltd. owns retail chains, operates mines, writes insurance, manufactures and distributes industrial products, manufactures fertilizers and chemicals, and distributes liquefied petroleum gas and medical and industrial gases.

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Wesfarmers Ltd (WES AU)

API in Role Reversal as Its Receives a Bid from Sigma

Sigma has disclosed a competing cash and scrip offer from API worth A$1.57 per share vs Wesfarmers' all-cash offer of A$1.55. We think that there...

Arun George

Aussie Pharma (API AU): Sigma's Rival Bid (Just) Edges Wesfarmers

Trading slightly below Wesfarmer's cash proposal. That looks like a reasonable place to enter. Wesfarmers can easily trump any tilt from Sigma.

David Blennerhassett

Asia-Pac Weekly Risk Arb Summary: Sydney Airport, Aussie Pharma, Milton, Shinsei Bank

This insight provides a summary of gross/annualised spreads (on deals discussed on Smartkarma) across Asia-Pacific as at the last trading date, and...

David Blennerhassett

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

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