Wesfarmers’ chemistry test

Wesfarmers is understood to have closely scrutinised Chemist Warehouse for an acquisition about two years ago. Picture David Clark

Wesfarmers is understood to have closely scrutinised Chemist Warehouse for an acquisition about two years ago.

However, the Perth-based listed conglomerate is believed to have passed on the opportunity, instead holding the view that it was better off focusing on its own operations.

The news comes as speculation emerges that Chemist Warehouse, which is advised by Rothschild, is in talks with at least one suitor, which could point towards a trade sale rather than an initial public offering of the business.

Wesfarmers recently has been viewed as the logical acquirer of the business, after reaping about $2bn from a sale of Coles shares it had held.

Chemist Warehouse generates about $250m of annual earnings before interest, tax, depreciation and amortisation, according to estimates from analysts, and the need for protective equipment such as hand sanitiser and face masks has helped sales amid the COVID-19 pandemic.

However, most believe that mergers and acquisitions are difficult to price in the current environment due to the uncertain outlook, which could put the brakes on any Chemist Warehouse acquisition.