Who are they buying and why would they want this business?

OK, that Aspen deal. Who are they buying and why would they want this business? Well they are going to be paying 60 Aussie cents a share for a business called Sigma. Not too much detail, although the official release does say that it is a "Detailed cautionary announcement". Where will the funding will come from, or how, or whether there will be a listing in Australia of any sort. Although they do say that we should know in due course. So, from the announcement so far, this is what we do know:



"Aspen shareholders are advised that Aspen has submitted an indicative non-binding proposal to acquire, either directly or through a wholly-owned subsidiary, Sigma Limited (“Sigma”) at an enterprise value of A$1,492 million (approx. ZAR 9,796 million), which implies a price per Sigma share of A$0.60 (approx. ZAR3.94) based on 1,178.6 million Sigma shares outstanding and net debt (including off-balance sheet facilities) of A$785 million (approx. ZAR 5,154 million) as reported at 31 January 2010 (together, "the Proposal")."



"The Proposal is currently envisaged to be executed by Scheme of Arrangement, but the transaction structure may be refined following due diligence. The Proposal is also subject to numerous conditions precedent, including the satisfactory completion by Aspen of a due diligence investigation, fulfillment of all necessary regulatory approvals and the unanimous recommendation of any potential transaction by the Sigma Board; and thus no formal agreement to enter into a transaction may result."



And then the announcement refers you to the Sigma website. And then it starts to look quite ugly. Board Resignations, Resignation of Chief Financial Officer, Resignation of Managing Director and CEO, several Trading Halt Requests in the last year. And basically earnings that look patchy at best, they have taken on too much debt. From their results: "Reported loss of $389 million. Includes goodwill impairment of $424 million; other non‐recurring items $52 million."



But the one thing that we do know about the management at Aspen, they are top notch, one of the most highly regarded management teams in the country. Not a done deal, they are going to take a serious look first. And then revert back to the Aspen shareholders.