Beggars can't be choosers when the roof is falling in

ANYONE who has sold their house via auction can relate to this scenario: the house is in need of serious repair and you are under some financial stress. As well, your job is under threat and the house is mortgaged

Next thing you know, the guy that lives next door decides he wants to expand his property and makes you a non-binding offer, subject to a range of conditions, including a building report

A couple of months later, the agent says there are no other buyers around and the guy next door comes back with another offer - even less generous than the first

To add to the pressure, the wife and kids - representing the other shareholders in ''Household Inc'' - are getting tetchy because the roof is starting to leak and the paint is peeling off the walls

In the world of corporate finance there is more complexity buying and selling companies but the same broad principles apply

Pharmaceuticals group Sigma is facing the same sale dilemma as the guy with the dilapidated house

South African company Aspen Pharmacare yesterday put a fresh and lower offer on the table for Sigma. This time it was a formal offer rather than an expression of interest. But it still contained plenty of conditions - which may or may not be capable of satisfaction

There is no doubt that Sigma is more valuable to Aspen than it is to other parties that have no position in the industry and the fact that Sigma's share price has been trading well below Aspen's initial expression of interest offer - and even the revised offer - suggests that the business is on the market. It also indicates that this offer is still reasonably shaky

Sigma said the proposal was conditional upon Aspen's satisfaction with its continuing due diligence investigations and the provision of finance for the acquisition on satisfactory terms

Other conditions include that Sigma's lending facilities remain in place on principally the same terms and with the same security position, with amendments relating to debt repayment requirements

The offer also requires the extension of the recently expired exclusivity arrangements, between Sigma and Aspen to August 2

This reads to me like Aspen has Sigma over a negotiating barrel. The Sigma board may in theory have all the say but its bankers and its shareholders appear to have carriage of this decision

The board's power has been further compromised over the past few months by the departure (either forced or not) of the company's chief executive, its chief financial officer and its chairman

In this respect, the company is a sitting duck - and a lame one

Its bankers have placed corporate adviser Lazard into the company to sell assets and shore up its financial position. This has been necessary because it has had to undertake massive write-downs on goodwill to account for the shrinking profit margins on several of its businesses, including the generic pharmaceuticals business it bought five years ago (Arrow) and Herron

The trouble is, the issues the business faces have not changed. Government regulatory changes to the Pharmaceutical Benefits Scheme continue to work against Sigma and increased competition in generics still eats away at its margins

Nothing the company has said recently could provide any comfort that it has found a solution to these issues. (The house is still leaking and the paint is still peeling.)

The competition regulator has ruled out consolidation in the industry that would enable players to cut costs and regain some pricing power

Sigma is also facing the additional onslaught of a shareholder class action - the potential damage from which is unknown

More importantly, Aspen is still the only bidder in the room. Its offer may be opportunistic but it is the only one out there and the seller is under plenty of pressure

The board must decide whether to accept or reject Aspen's overtures because, without the Sigma board's consent, the offer will not be put to shareholders. Want to find out more about house number?

Given Sigma's recent track record, it would be a brave board to tell Aspen to go jump. Vulture fund investors like Orbis have been picking up stock in recent months and may be looking for a quick turn