As many in the market suspected, Sigma Pharmaceuticals' putative South African suitor has tried a bit of cheese paring by slicing its proposed 60c a share offer 5c (or 8.25%) to 55c.

Many investors had come round to the view that with no statement and due diligence over (and nothing in Tuesday's announcement from Sigma), Aspen Pharmacare was looking to get Sigma for a lower price.

And that is what transpired with yesterday's statement from the board.

Sigma shares jumped from 39.5c on Tuesday to around 45c yesterday, a rise of 13.9%, but still well under the suggested offer price.

The offer values Sigma at $648 million.

Sigma said South Africa's Aspen had proposed that the transaction be implemented via a scheme of arrangement.

"The Sigma board is considering the proposal and recommends that shareholders take no action at this stage," the company said.

Sigma said the proposal was conditional upon Aspen's satisfaction with its continuing due diligence investigations, and provision of finance for the acquisition on satisfactory terms.

Other conditions include that Sigma's current lending facilities remain in place on principally the same terms and with the same security position as exist currently, with amendments relating to existing debt repayment requirements.

(This means that the banking syndicate to Sigma doesn't pull the rug from under the company by playing hardball on the current loan terms.)

The offer also requires the extension of the recently expired exclusivity arrangements to August 2, 2010.

It now lands Sigma's board in a pickle.

The bid is cheaper, but the question now is, are there any other bidders around?

And having caused the shares to crash by some poor management and oversight, will any rejection of this proposed offer be supported by an upset shareholder base?

Other terms include: the offer and other terms satisfactory to each party, including certain warranties, 'no talk' and 'no shop' provisions and provisions entitling Aspen Group to a break fee on termination for certain reasons.

  • Extension of the recently expired exclusivity arrangements to 2 August 2010
  • No termination or amendment of certain material contracts as a consequence of the potential change in control of Sigma
  • Shareholder and court approvals for a scheme of arrangement
  • Regulatory approvals
  • No material adverse change occurring from 30 June 2010
  • No 'prescribed occurrences' (being the matters referred to in section 652C of the Corporations Act)
  • No other adverse or value affecting events or external event conditions (such as material decreases in stock exchange indices).

    • All these are standard in takeovers, but there's a suggestion that the Aspen group is hedging its bets, particularly with the demand to be able to continue due diligence.

    It has so far had around five weeks to examine Sigma's books.

    You'd have to ask after this length of time, what else do they need to know, or can't find in the accounts?

    And, if the extra examination finds problems, will the price be sliced again, or will the offer be abandoned completely?