May 21, 2010 / 12:17 AM / 9 years ago

UPDATE 4-Aspen Pharma bids $570 mln for Australia's Sigma

* Aspen to pay $0.60 per Sigma share, 71 pct premium

* Second bid in a week targeting health care companies

* Sigma’s shares jump 47 pct to A$0.515

* Aspen shares up 0.6 pct

(Adds analyst comment, details, updates share price)

By Victoria Thieberger and Tiisetso Motsoeneng

MELBOURNE/JOHANNESBURG, May 21 (Reuters) - South Africa’s Aspen Pharmacare (APNJ.J) has bid $570 million for debt-laden Australian drug maker Sigma Pharmaceuticals SIP.AX to boost its presence in the fast-growing generic drug market.

The largest player in Australia’s generic drug industry, Sigma is struggling with a battered share price. It booked an annual loss and its chairman, chief executive and chief financial officer all left the company last month.

Aspen, Africa’s largest pharmaceutical firm and one of the world’s top 20 manufacturers of generics, has been in Australia since 2001.

Aspen said it would offer A$0.60 per Sigma share, valuing the firm at A$707 million ($574 million) and well below Sigma’s debts at end-January of A$785 million.

The bid price is a 71 percent premium to Thursday’s close, but well below the A$1.00 value at the start of this year.

“On the face of it, A$.0.60 looks like quite a big premium to the last traded price, but Sigma has been a business in turmoil in recent times, following a suspension of its listing, breach of debt covenants and resignation of senior management,” said Quinton Ivan, an analyst at Cape Town-based Coronation Fund Managers.

“The price that Aspen has offered looks low if you look at the various multiples on which similar deals globally have been consummated. So it could be an opportunistic offer on Aspen’s part.”

Sigma said it was considering the offer and advised shareholders to take no action. Its shares surged 47 percent to A$0.515 after news, their biggest rise ever.

SICK SIGMA

Sigma’s shares was suspended for five weeks to March 31 as it reviewed its full-year guidance and made big writedowns on the goodwill of its generic drugs business.

Sigma then reported a A$390 million annual loss and its shares almost halved when they resumed trading.

“There is a definintely potential for growth in Australia’s generic market,” said Grant Lowton, an analyst at Kagiso Securities in Johannesburg.

“Even though Sigma is a troubled company, it’s probably a case of Aspen management believing they can implement some sort of turnaround strategy.”

Some market players expressed concern about the Australian government’s plan to lower generic prices.

“There is a question over the long-term profitability of those activities,” said a fund manager who asked not to be named.

The takeover approach came just a week after private equity groups Carlyle [CYL.UL] and TPG [TPG.UL] bid for Australian hospital operator Healthscope HSP.AX. That offer was raised on Thursday to A$1.8 billion ($1.5 billion). [ID:nSGE64J00F]

Friday’s offer implies a price of 7.1 times expected earnings before interest, tax, depreciation and amortisation (EBITDA).

That compares with other large health sector deals in 2004 and 2006 of an average EBITDA multiple of about nine times, but that was during the bull market.

Investment bank Lazard (LAZ.N) has been hired to advise Sigma, while Investec (INLJ.J) is advising Aspen.

Aspen's shares were down 2.5 percent at 74.6 rand at 1320 GMT, underperforming a 0.9 percent drop in Johannesburg's All-Share index .JALSH. ($1=1.231 Australian Dollar) (Additional reporting by David Dolan in Johannesburg; editing by David Cowell)

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