Priceline owner Australian Pharmaceutical Industries backs $763m Wesfarmers takeover offer

The takeover battle for Australian Pharmaceutical Industries has ended, with the Priceline owner finally backing a $763m takeover bid from retail giant Wesfarmers.

Priceline owner Australian Pharmaceutical Industries has given the green light to a $763m takeover bid from retail giant Wesfarmers. Picture: APP

The takeover battle for Australian Pharmaceutical Industries has ended with the Priceline owner finally backing a $763m takeover bid from retail giant Wesfarmers after rival bidder Sigma withdrew its offer last week.

API said on Monday that it had entered into a scheme implementation deed that will see Wesfarmers acquire the remaining shares in the group it does not already own under its $1.55 a share all cash offer.

The pharmaceutical wholesaler chemist operator has recommended its shareholders vote in favour of the scheme in the absence of a superior proposal and an independent expert review.

The $1.55 a share cash payment will be reduced by a five cents per share dividend, API said, consisting of a previously announced fully franked 2c a share final dividend and a fully franked 3c a share special dividend.

The news saw API’s shares climb through the day to close at $1.54, up 3.7 per cent. Wesfarmers closed at $60.03, down 0.5 per cent.

The deal will see API’s pharmaceuticals wholesale businesses and its retail brands – which also include Soul Pattinson Chemist and Pharmacist Advice – come under the same roof as Wesfarmers’ Bunnings, Kmart and Officeworks retail businesses.

Wesfarmers managing director Rob Scott said the deal represented an “attractive opportunity” for the retail conglomerate to enter the growing health, wellbeing and beauty sector.

“Wesfarmers continues to see opportunities to invest in and strengthen the competitive position of API and its community pharmacy partners by expanding ranges, improving supply chain capabilities and enhancing the online experience for customers,” Mr Scott said.

Wesfarmers CEO Rob Scott, left, and chairman Michael Chaney. Picture: Colin Murty

Mr Scott said Wesfarmers would not attempt to integrate its new pharmacy assets into its big-box retail store offerings like Kmart, and pledged to respect federal government legislation that stipulated pharmacists must own pharmacies.

“As we have previously stated, Wesfarmers supports the community pharmacy model, including the pharmacy ownership and location rules,” he said.

“Wesfarmers recognises the importance of strong relationships with our trading partners and we look forward to working closely with API’s pharmacy partners, suppliers and other industry stakeholders.”

The battle for API began in July, when Wesfarmers lobbed an initial $1.38 a share takeover offer that was rejected.

In September, Wesfarmers came back with its current $1.55 all-cash offer before Australia’s largest pharmaceutical distributor entered the fray with a cash and scrip deal worth around $773m.

Although the API board indicated Sigma’s bid was favourable, it did not label it superior. Meanwhile, Sigma’s 10.1 per cent shareholder Allan Gray demanded a shareholder vote on the move, blasting it as a “value destroying transaction.”

Wesfarmers then pounced on a 19.1 per cent stake in API held by investment house Washington H. Soul Pattinson by exercising a call option, placing a major roadblock in Sigma’s path.

Sigma withdrew its bid on Friday, with chairman Ray Gunston declaring the acquisition was not a “must have”.

API initially courted Sigma two years ago with a $727m takeover bid, which was rejected by Sigma’s CEO Mark Hooper who declared he could deliver better value for shareholders through his growth strategy.

Wesfarmers’ takeover offer is subject to approval from the courts and the Australian Competition and Consumer Commission.