Two of Western Australia’s most influential companies are turning their backs on big-ticket mergers and acquisitions, opting instead to drive down debt and buy small bolt-on businesses.
Seven Group Holdings and Wesfarmers, both based in Perth, made presentations to the UBS Australasia Conference in Sydney on Monday.
Wesfarmers focused on the strong performance of its discount department store Kmart and opportunities to grow its pharmacy business, which owns the chemist brand Priceline that it inherited from its $763m acquisition of API in 2022.
Its board is understood to be shying away from large-scale mergers and acquisitions, believing they are unlikely to add value for shareholders, even when its share price is sky high.
This means that a deal to buy Ramsay Health Care is almost certainly off the table, after detailed analysis of the operation, as are deals for other major ASX companies such as Mineral Resources.
The lack of synergies between its chemicals and fertiliser business on the west coast and operations on the east coast makes interest in the Incitec Pivot fertiliser unit unlikely.
Adding weight to the view that lithium acquisitions are off the agenda for Wesfarmers is the fact that managing director Rob Scott stressed in his presentation that its focus was on building its lithium hydroxide refinery, and it was more interested in operational investment.
Overall, bolt-on acquisitions made the most sense.
Meanwhile, Seven Group Holdings has been speculated as a potential buyer of the BGC building materials unit which is up for sale for up to $800m.
While senior sources at the company would not comment, they stressed the importance of remaining disciplined on price.
Industry sources expect the group would likely not pay a higher multiple than what it outlaid for building materials provider Boral.
While small mergers and acquisitions are of interest, its main focus is reducing its debt from 2.2 to two times earnings.
Sources said higher power costs were a frustration but the greater concern was lower productivity.
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Directors met on Monday afternoon to consider the offer.
The takeover battle for the $300m dental care chain has dragged on for almost a year and investors want some closure.
The board told investors to reject the last takeover bid price at $1.90 per share.
Earlier, Crescent Capital bid $2.05 per share for the stock, but its scheme was voted down.
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