Sirtex Medical Limited (ASX: SRX)

 SRX Details

End to the bidding war: Sirtex Medical Limited is an Australia based medical device company having a global marketcoverage. The group latelyreceived a non-binding, indicative and conditional proposal from CDH Investments at an offer price of $ 33.6 per share. Sirtex also reported that after a period of due diligence, the Group received an offer capable of acceptance from CDH for the acquisition of all of the shares in Sirtex by way of scheme of arrangement which included a draft scheme implementation deed. Accordingly, Sirtex made Varian Medical Systems, Inc aware of the material terms and conditions of the CDH Proposal and according to the terms of the deed, Varian has the right, but not the obligation, to submit a counterproposal. Once the Board has completed the assessment, it will recommend which the proposal is in the best interests of shareholders.

The Board has been continuously evaluating the proposals by exploring the merits and risks including the offer prices and was considering the timing of the completion and the potential outcomes for Sirtex shareholders if a control transaction did not complete. Meanwhile, Varian has indicated that they will remain committed to the terms of the current scheme of arrangement by which Varian would acquire all shares in Sirtex at the purchase price of $28 per share. Thus, Varian indicated recently that it will not be submitting a counterproposal to the offer made by CDH.

While CDH’s proposal sits at a premium to Varian’s proposal, the latter has already been approved by SRX board and has all the necessary regulatory approvals.


Financial Performance for second half of FY17 (Source: Company Reports)

On the other hand, Sirtex’s first half 2018 financial year dose sales were relatively flat and reflected a decline of 0.4 per cent as compared to the prior corresponding period (pcp). The Group gained momentum in the second quarter of FY18 in terms of dose sales, but after the announcement of Varian Scheme, dose sales were not able to meet the internal expectations. It was reported that Worldwide dose sales for the period 1 January to 30 April 2018 were 3,755, down by 10.6 per cent as compared to the prior corresponding period. FY18 underlying EBITDA is now said to be at the lower end of the $75-85 million as per the guidance previously issued. It is quite surprising that the takeover offers have been cited by SRX for the drop-in sales.

SRX stock climbed up by 80.13 per cent since the start of the year and was up by 7.5 per cent in last one month. The stock slipped by 2.78 per cent on 23 May 2018. Given the prevailing issues and lower than expected performance in the near term, we put a “Sell” recommendation at the current price of $ 29.00, which is above the Varian offer price.


SRX Daily Chart (Source: Thomson Reuters)

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