Wesfarmers Limited → Australian Pharmaceutical Industries Limited (API)
completedWesfarmers, via wholly owned subsidiary WFM Investments, entered a Scheme Implementation Deed to acquire 100% of Australian Pharmaceutical Industries (owner of Priceline Pharmacy and Soul Pattinson Chemist) for A$1.55 cash per share, following a competitive process that had included a rival bid from Woolworths. Wesfarmers ultimately prevailed after Woolworths withdrew its offer, and the ACCC cleared the deal on 11 February 2022; completion followed in March 2022, marking Wesfarmers' entry into the pharmacy retail sector.
Wesfarmers wanted to establish a platform in the health, wellbeing and beauty retail sector, seeing API's Priceline network, pharmacy distribution business and beauty category as complementary to its existing retail portfolio (Bunnings, Kmart, Officeworks) and a foothold for growth in a defensive, growing consumer segment.
API's board recommended the deal after an extended bidding contest with Woolworths and Wesfarmers pushed the offer price up from an initial A$1.38/share to A$1.55/share, judging the increased cash price, together with certainty of completion, to be in shareholders' best interests once Woolworths withdrew its rival bid.
API shares traded up toward the offer price as the scheme progressed through 2021-22, tracking the successive bid increases during the Wesfarmers/Woolworths contest; the November 2021 Scheme Implementation Deed announcement itself produced only a modest immediate move since the higher price had already been substantially anticipated by the market during the preceding bidding war. Wesfarmers' own share price showed no material reaction, reflecting the deal's small scale relative to its overall market capitalisation.
Press (Inside Retail, ShareCafe) characterised the deal as a hard-fought contest between Wesfarmers and Woolworths for a strategic pharmacy retail asset, with commentators split on whether API's fragmented franchise/pharmacist ownership model would prove a "growth drug or poison pill" for Wesfarmers' new health division.
Deal mechanics
Scheme of arrangement; all-cash consideration of A$1.55 per API share, reduced by the cash value of any dividends (up to 5 cents per share) paid by API before implementation.
ACCC approved the acquisition on 11 February 2022, finding Chemist Warehouse, Woolworths and Coles would continue to compete strongly with Wesfarmers post-acquisition in over-the-counter pharmaceutical and beauty/personal-care retail.
Learn more
- Wesfarmers & API enter into scheme implementation deed - Finance News Network
- Australian Pharmaceutical Industries Limited Scheme Booklet
- ACCC Approves Wesfarmers' API Takeover - Channel News
- Wesfarmers' proposed acquisition of API not opposed - ACCC
- Wesfarmers' API takeover: Growth drug or poison pill? - Inside Retail Australia