Aspen-Sigma deal would create No. 1 Aussie drugmaker

While Abbott Laboratories was capturing headlines for its acquisition of a chunk of India's Piramal, a Southern Hemisphere deal took aim at the top spot in Australia's prescription drug market. Africa's biggest drugmaker, Aspen Pharmacare, launched a takeover bid for Australia's Sigma Pharmaceuticals, taking advantage of the latter's recent financial difficulties to offer 60 cents per share, or A$707 million ($585 million), plus assumption of debt, bringing the deal's total value to A$1.49 billion.

If the merger is successful, Aspen would own 12 percent of the Australian market--a bigger share than pharma giants like Sanofi-Aventis and Pfizer. In 2009, the company filled 6.35 million scrips, while Sigma handled 7.8 million.

However, as The Australian notes, other offshore groups and private equity firms will be "sounded out" regarding their intentions toward Sigma. Industry sources have suggested that Indian pharmaceutical companies like Strides Arcolab and Ranbaxy have been increasingly eyeing assets in Western countries. And some could be interested in Sigma's drug manufacturing and distribution channel.

Aspen's offer could touch off a bidding war, but as The Age points out, any buyer would be wary of Sigma's recent difficulties. Sigma has lots of debt, and its margins have been dropping to government pricing pressure and competition from rival drugmakers. But most spectacular was last month's brouhaha, when the company took nearly $500 million in write-downs, posted a $390 million loss, and announced its CEO and CFO were stepping down. Since then, its chairman and one non-executive director have chosen to retire.

Indeed, Aspen told investors that its own offer for Sigma was contingent on an investigation of the company's accounts, and added that the takeover offer could change after due diligence. For its part, Sigma's board says it's still considering the buyout proposal.

- get the Aspen release
- see the story in The Age
check out more from The Australian
- get more from the Wall Street Journal