ACCC paves way for Wesfarmers to proceed with $763.6m API acquisition

The competition watchdog has approved Wesfarmers’ takeover of Priceline-owner API, despite a number of concerns from industry players.

The ACCC is backing Wesfarmers in its plans to acquire Priceline-owner API. Picture: AAP Image/Mick Tsikas.

Wesfarmers is one step closer to completing its planned $763m acquisition of Australian Pharmaceutical Industries after the consumer watchdog approved the deal.

The Australian Competition and Consumer Commission (ACCC) said on Friday that it would not oppose the acquisition of API, which owns several pharmacy chains including Priceline and Soul Pattinson Chemist.

It said that a takeover by Wesfarmers was unlikely to reduce competition within the market because there was already many large and well-established businesses in the sector that would compete “strongly” with API including Chemist Warehouse, Woolworths and Coles.

“We consider that API’s competitors will continue to compete strongly with Wesfarmers after the acquisition,” ACCC commissioner Stephen Ridgeway said.

The regulator conceded that while most stakeholders had little concern about the owner of Kmart and Bunnings acquiring API, there was a small number of industry participants who were worried about competition.

“After considering these concerns, the ACCC maintained its view that the proposed acquisition would not have the effect or likely effect of substantially lessening competition,” the consumer watchdog said.

The announcement had little impact on Wesfarmers’ share price, which was down 1.4 per cent to $52.67 at noon.

Wesfarmers is offering shareholders $1.55 per share after Woolworths pulled out of the race last year, despite making a higher bid after the West Australian conglomerate said it would use its nearly 20 per cent stake to block its rival’s proposal.

The ACCC said it also examined potential effects on competition of Wesfarmers owning both

the Priceline Sister Club and 50 per cent of Flybuys. It found the ownership would not have a lock-in effect on consumers in any market.

“We also consider the benefits obtained from the additional customer transaction data do not appear to be so strong as to result in a substantial lessening of competition from the acquisition,” Mr Ridgeway said.

“Customers generally do not only join one loyalty scheme, and major competitors to Wesfarmers after the acquisition will have, or could start, their own customer loyalty schemes.”

API is also a pharmaceutical wholesaler and runs non-surgical skincare clinic business Clear Skincare. It is one of Australia’s largest health and beauty retailers and pharmaceutical distributors.

The ACCC also notes that Wesfarmers will be required to comply with the same laws and regulations as API regarding pharmacy ownership and location, and will have the same obligations as API under the Franchising Code of Conduct.