Sydney, Australia (CU)_ Wesfarmers Ltd, the Australian retail conglomerate, made a notable proposal worth A$680 million for pharmacy chain Australian Pharmaceutical Industries (API) on Monday, its first venture into the pharmacy industry. Wesfarmers, the parent company of Bunnings Hardware and Officeworks, stated that API will serve as the foundation for a new healthcare division, allowing it to invest and grow skills in the health and wellness sector.
API shares increased 20% in the previous trade following Wesfarmers’ price offer for the parent company of the Priceline Pharmacy and Soul Pattinson brands was valued at A$1.38 per share, which is a 20.5 percent premium to API’s previous close of A$1.145 on Friday. According to the company, API has begun evaluating the Wesfarmers’ request.
Wesfarmers announced that API’s largest shareholder Washington H Soul Pattinson Co, which retains 19.3% of the pharma company, has reached a deal with the Wesfarmers and expressed its support for the plan. The offer came during the pandemic time where coronavirus limitations have forced API to close stores and clinics, troubling the company’s bottom line and market value. Following a loss of over 8% in 2020, the company has thus far lost about 7% this year.
Gretel Janu, CS analyst, said, “API shares have been out of favour in recent months given its underinvestment in its [distribution centers] relative to its peers… and continual COVID-19 pressure impacting the profitability of its retail businesses. We believe Wesfarmers is particularly interested in API’s retail businesses as it looks to enter the Health and Wellbeing sector.”
Under this agreement, Wesfarmers would have access to API’s retail outlets, skincare clinics, and pharmaceutical and healthcare product distribution network. API had previously announced in a separate filing that it will suspend producing personal care and over-the-counter goods in New Zealand in order to streamline its operations, and that this would have a negative impact on its earnings for the fiscal year ending August 31.
