Sigma makes bid to dominate Australian drug market

Sigma is Australia's biggest contract drug manufacturer, offering a full range of pharmaceutical production and support services, as well as producing its own-label products and maintaining a significant wholesale and distribution network.

The company has made an unsolicited off-market offer of $422m (€335m) for drug manufacturer and retailer API, although details of the proposal are yet to be finalised by Sigma and there is no indication yet as to whether API would accept such an offer.

"Sigma believes that merging the two companies would create significant shareholder value for the shareholders of both companies due to strategic and cost synergies that exist on combination of the two businesses,"​ said a Sigma statement.

"However, at this stage there is no certainty that merger terms will be agreed or that a formal offer will be made."​

Likewise, a statement from API said: "The board of API will evaluate the Sigma proposal with its corporate and legal advisers and provide advice to API shareholders as soon as practicable."​

"The Sigma proposal is highly conditional and proposes a value for API shares which is at a discount to API's current share trading price."​

Sigma has long held a keen interest in API and tried to pull off a similar manoeuvre back in 2002, which was swiftly stopped in its tracks due to anti-competition issues, as Symbion Health was the only other competition at the time.

However, this time around the balance is tipped more in Sigma's favour, with the recent entrance of a fourth competitor into the Australian market, DHL Excel, a division of Deutsche Post.

The presence of another player may or may not satisfy the Australian Competition and Consumer Commission, who would still need to approve this latest bid if it is successful.

Meanwhile, the show of cards by Sigma also has the potential to spark a bidding war from other interested parties.