AscentPharma (APH) - Strides ahead

In March 2010, AscentPharma issued a release indicating that they had received an indicative offer from their majority shareholder, Strides ArcoLab, for the remainder of equity at 35c a share.  Punters hoping to make a quick return on the deal will have been disappointed.  Eight months later and  progress since the initial announcement has been limited, though there have been signs that Strides is still interested.  

In August, Strides picked up 3% in an offmarket trade at 35c (taking them to over 60%).  Then in September, Strides completed an institutional placement to raise US$100m, which they announced they were earmarking for overseas acquisitions.  The most recent update from APH in November indicated that any eventual deal would need to be completed in 2011. 

In the interim, APH released their HY10 results, which suggest that Strides will be getting a good deal, if it can get the rest of APH at 35c a share.  That would value APH at a PE of c.8x trailing 12m earnings.  As at time of writing Strides was trading on the Bombay exchange at a PE of c.14x.  

At yesterday's 29c close, APH looks good value for a 20% return in the next 12 months if the offer for 35c comes through.  Given the bargain basement offer, if the independent directors can wrangle a little more out of Strides, it could be even better.  

Disclosure: APH (Long)