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Australia's Sigma Tops Rival Offer for Symbion

Australia's Symbion Health said on Tuesday that Sigma Pharmaceuticals offered A$1.085 billion (US$912 million) for its consumer and pharmacy businesses, trumping a rival offer and
potentially triggering a bidding war.

Symbion said it would back Sigma's bid over an earlier one from hospital operator Healthscope, but also gave Healthscope and its private equity partners two days to come up with a better offer.

Healthscope was not immediately available to comment, but analysts said the company and its partners, Ironbridge Capital and Archer Capital, were likely to take up the offer.

"A higher bid is likely, given the amount of due diligence the Ironbridge-Archer consortium has undertaken, and the relatively modest premium Sigma et al have offered," said Deutsche Bank analyst David Low.

Symbion shares erased early gains to be unchanged at A$4.27 in a broader market down 0.24%. Sigma was up 0.4% at A$2.32 and Healthscope gained 0.9% to A$5.51.

Under the new proposal, Sigma plans to acquire Symbion's consumer business, while its partner, a private equity consortium led by Carnegie Wylie, would get Symbion's pharmacy services.

The two businesses account for about a third of Symbion's earnings. Sigma is unable to acquire the pharmacy business because of competition concerns.

Symbion said the new offer was A$42 million higher than the value put on the consumer business under the Healthscope proposal and was not conditional on regulatory approval, due diligence or financing.

Healthscope Offer

Healthscope, Ironbridge and Archer had offered A$2.86 billion bid for the whole of Symbion, with the private equity duo planning to take the consumer and pharmacy business, which they valued at A$1.043 billion (US$879 million).

Healthscope would buy the pathology, diagnostic imaging and private hospital part of Symbion, and that would still stand regardless of who buys the consumer and pharmacy businesses.

Sigma told Reuters last week it was in talks with a private equity consortium on a possible joint offer for Symbion's consumer and pharmacy business, and wrote to Symbion about the proposed acquisition.

Symbion said at the time the offer letter contained insufficient information.

Sigma has long had its eye on Symbion's consumer business, which includes the Natures Own, Cenovis and Bio-Organics brands.

"It would be very advantageous for Sigma to add the consumer foods to their product offering of generic drugs and OTC," said Shaw Stockbroking analyst Brent Mitchell.

He said Sigma would also be able to extract cost savings from economies of scale, marketing costs, product sourcing and some production with the Symbion businesses -- cost benefits that would not be available to Ironbridge and Archer.

Mitchell put the chances of a counter-offer at 50:50, and said Sigma was unlikely to bid any higher.

"They don't want to overpay. If they don't get it, it's not the end of the world," he said, citing other smaller acquisition opportunities. Symbion, the pathology, radiology and pharmacy group that remained after Mayne Group spun off its drugs arm in 2005, has been touted as a likely target of consolidation in Australia's healthcare industry, and in January rejected a A$2.3 billion (US$1.9 billion) approach from Primary Health Care.