Surge in API on talk of takeover

BAD news from Australian Pharmaceutical Industries did nothing to hurt the company's share price, which surged 20 per cent yesterday on takeover speculation.

BAD news from Australian Pharmaceutical Industries did nothing to hurt the company's share price, which surged 20 per cent yesterday on takeover speculation.

Responding to the buying frenzy, API told the Australian Stock Exchange of informal approaches from unnamed parties "regarding the company's ownership".

It also posted an earnings downgrade and revealed that a $17 million IT glitch, which forced a trading halt earlier this year, had swallowed a further $4 million.

API said it expected that net profit for the 2007 year, ending in April, would be affected by increased depreciation and higher interest costs.

Yet shares in API rose 43c or 19.2 per cent to $2.67 as rumours suggested supermarket retailers Coles Myer and Woolworths were looking at the company.

Interest in acquiring API has also been expressed by pharmaceutical and diagnostics outfits Symbion and Sigma.

But API said approaches so far were "of an informal nature".

"A data room has not been established," the company said.

Symbion chief executive Robert Cooke earlier said his company was "awaiting with anticipation a better understanding of API's recent events".

"To look at API for anyone at the moment is going to be pretty difficult when you've had this significant trading halt and event," Mr Cooke said.

API delayed results this year after discovering it had lost track of $17 million through "computer problems".

Last month it reported an unaudited 41 per cent fall in annual net profit to $20.56 million.

On the same day, chief executive Jeff Sher quit, and one week later API sacked chief financial officer Daniel Lucas but said his departure was not linked to the missing money.

The company said $4 million had been spent hunting for the funds and in redundancy payouts, while investigations were continuing and costs could again rise.

Deutsche Bank health care research analyst David Low said a formal bid was unlikely.

"That the approaches have not gone through a formal process would suggest that a formal bid is unlikely to occur soon," Mr Low said.

"The accounting issues that they've faced would make any buyer cautious about relying on financials in valuing the company."

API also revealed yesterday chief executive Stephen Roche's salary, comprising fixed remuneration of $700,000 and a possible $250,000 short-term incentive bonus.