M&A: Could Sigma outbid Wesfarmers for API?
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Despite having a market cap of approximately $100m less than API and just under one per cent of Wesfarmers’ $66b value, Sigma (which is also a pharmaceutical company) put forth a bid to merge which at $1.57 per share was higher than Wesfarmers’ value.
Wesfarmers first made a bid for API in July at $1.38 per share but after being rejected came back at $1.55 per share which won over the API board.
But Sigma told its shareholders the API board likes its offer and is determined to grant it access to undertake due diligence.
Sigma advised the cash return was just one of many good things that API shareholders would get from the deal.
It promised that API shareholders would own 48.4% of the merged entity, and this new firm would have greater scale and balance sheet capability, a higher revenue stream, product and customer diversification and synergies and efficiencies available for both shareholders.
In response, API said that after careful consideration, its board advised that the Sigma offer would be “more favourable to the shareholders of API as a whole than the latest proposal provided by Wesfarmers to API, notwithstanding that it would likely take an overall longer period of time to implement”.
On that basis, API said it would allow Sigma to undertake confirmatory due diligence.
API shares rose by five per cent this morning but was slightly short of either bid.
The Sigma bid for API was not the only M&A deal announced today.
Lighting manufacturer FOS Capital (ASX:FOS) announced it was buying New Zealand based LED company Ecopoint.
FOS Capital will pay NZ$1.87 million, nearly $1.5 million of which will be in cash and the rest in shares.
In FY21 Ecopoint made NZ$2.76 million in sales and a pre-tax net profit of $311,000.
This is FOS Capital’s first deal since it listed in June 2021, and it says the deal will help both firms expand across the Tasman.
Meanwhile, SaaS business ReadyTech (ASX:RDY) announced it was buying student management software business Avaxa for $2.2 million.
ReadyTech says this deal will increase its market share in the education sector, particularly with TAFE institutions.
It will deliver incremental recurring revenue in FY21 of approximately $670,000 with an EBITDA margin of 15%.
Both companies saw slight boosts to their share prices this morning.