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Aspen pays more for less of Sigma Pharmaceuticals

Posted on 18 August 2010


Aspen Pharmacare is set to acquire the drug making arm of Australia's Sigma Pharmaceuticals for $804 million.

This would provide Aspen with approximately a quarter of Australia's generic drug market.

This transaction comes after Aspens recent withdrawal of the offer to acquire the whole of Sigma for $589 million. This will leave Sigma with its drug distribution and pharmacy business as well as the outstanding debt owed by the company whilst Aspen will acquire the highly prized asset it has coverted most.

See deal record at Current Agreements | View 2010 M&A Scorecard

It may have been possible for Aspen to turn the drug business around, however this recent proposal will remove a great deal of risk and uncertainty associated with acquiring the company as a whole. Particularly as there were already doubts regarding the true value of the Sigma, the servicing of its current debts and current issues and surrounding the company.

This is in light of a recent 48 percent plunge in stock value in one day, its battle to pay off a $90 million debt by March and a potential lawsuit against the company from existing shareholders.

Sigma could use the cash injection provided by this deal in a variety of ways. For example, one particular strategy would be to pay off existing debts and return capital to shareholders.

Whatever strategic decision is made with regard to the distribution of this cash the deal will enable Sigma to emerge in a financially stronger position for business growth under the new structure. However, it must be recognised that Sigma is now a much small business that it was previously.

This is the latest news on Aspen's plans for Sigma - you can read our original article on Aspen's initial acquisition plans here


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