Aspen to buy Sigma Pharmaceuticals' drug division for $900m

Troubled drug developer and healthcare provider Sigma Pharmaceuticals finally put an end to months of speculation today declaring that it would recommend shareholders accept an offer from Aspen Pharmacare to buy its pharmaceuticals business for $900 million.

South Africa’s biggest drug company, Aspen had initially sought to buy all of Sigma, however the deal announced today excludes the Australian company’s wholesale and retail healthcare divisions.

Aspen and other companies first began making overtures earlier in the year after Sigma reported a greater than expected full-year loss of $389 million, revealing more recently that its generics business was in trouble.

Aspen made an offer to buy Sigma in May for $0.60 per share, but last month downgraded its offer to $0.55 per share. The revised offer was rejected by Sigma, after which Aspen was rumoured to be contemplating abandoning the deal.

It now seems likely that it will take possession of Sigma's pharmaceuticals division, which is made up of the company's Generics, Consumer, OTC, Herron, Ethical Products, Medical Products orphan and manufacturing businesses.

Sigma said that the $900 million being offered exceeds the company’s current net debt, including securitised debt.

A number of terms were proposed as part of the agreement including granting Sigma long term supplier status with the divested pharmaceuticals business. Aspen would also support Sigma’s existing pharmacy sales programme and provide contract manufacturing services. And finally, Sigma would provide wholesaling, distribution and logistics services to the sold businesses.

Commenting on the announcement today Sigma chairman Brian Jameison said that company had mulled a number of options over the last few months for the sale of all or part of Sigma, but that the current offer from Aspen represents the best value for shareholders.

The announcement triggered frenzied trading with 15.26 million Sigma shares changing hands today, although the stock managed only a two cent rise to $0.52.