Wesfarmers aims to block Woolworths on $872m bid for Priceline owner API
Wesfarmers boss Rob Scott plans to block Woolworths’ $872m competing takeover bid for Priceline owner Australian Pharmaceutical Industries.
Wesfarmers chief executive Rob Scott has thrown down the gauntlet to rival market heavyweight Woolworths over the takeover battle for Australian Pharmaceutical Industries, declaring the Perth-based conglomerate will sit on its 19 per cent stake in API and block any attempt by the supermarkets group to gain full ownership.
The declaration could rob Woolworths of its ability to move to 100 per cent control of API that would deliver the synergies required to justify its $872m takeover bid for the pharmacy business in the first place, but also it possibly leaves Wesfarmers indefinitely stranded with capital tied up in a minority API stake.
Mr Scott is seeking to create maximum headaches for Woolworths boss Brad Banducci heading into the Christmas break as the two battle it out for the pharmaceutical wholesaler and retailer. He revealed Wesfarmers has held meetings with API pharmacists as well as the powerful Pharmacy Guild who are fearful of a Woolworths victory.
Declaring on Wednesday the Wesfarmers takeover offer of $1.55 per share for API as the “only offer capable of getting to 100 per cent” he also reminded investors that the rival $1.75 per share bid from Woolworths had not been recommended by the API board, was indicative only and that there was “a lot of uncertainty” whether Woolworths will be able to proceed.
Mr Scott is also making a direct play to pharmacists, who will have some say in the future ownership of leading pharmacy banner group API and whose chains include Priceline and Soul Pattinson, promising to respect the independence of pharmacists and warning that Woolworths supermarkets would seek to compete with API chemist franchisees in the booming categories around health, wellness and beauty.
But the biggest card was played on Wednesday when Wesfarmers declared it would use its existing 19.3 per cent stake in API, built since it launched its takeover bid in July, to vote down any offer from Woolworths.
“Wesfarmers does not intend to accept into any takeover offer made by Woolworths for API,” Mr Scott declared, and doubled down on that stance by saying the Woolworths proposal — 20 cents per share higher than his own — was not an official takeover and as such Wesfarmers was not compelled to match it.
“There is nothing to match at the moment there is not an alternative proposal that is capable of being accepted or even capable of being matched and there are is a lot of work that needs to be done on the competition side.
“We have a matching right, but the indicative, conditional (Woolworths) proposal hasn’t been viewed as superior by the board so the matching rights haven‘t been triggered and there is still we think a lot of uncertainty whether Woolworths proposal will be capable of being accepted.
“Clearly there are significant competition issues,” Mr Scott said.
He said there were two “fundamentally different proposals” before the API board; an offer by Wesfarmers that would help API as a key channel in heath, personal care and beauty and an alternative from the supermarket industry that already accounts for 60 per cent of market share of personal care and beauty products of which Woolworths currently has the largest market share.
Mr Scott said as a former owner of Coles, Wesfarmers knew the importance of health and beauty in the supermarket aisle and that this is what Woolworths was chasing and was a strategy in “total conflict” with the growth of Priceline pharmacies.
And in a warning that Wesfarmers could be a thorn in Woolworths side, Mr Scott signalled Wesfarmers had no intention of selling its stake and letting Mr Banducci win the day even if his bid was higher at the moment. It could lead to Woolworths having majority control of API but with Wesfarmers as a disgruntled minority shareholder and blocking off key synergies Woolworths would seek to harvest from owning the pharmacy business.
“We are the only party, based on what we announce today, is capable of getting to 100 per cent so an alternative proposal would need to be for something other than 100 per cent, if that was case that then makes it impossible and impractical for them to achieve synergies that they may hope to achieve,” Mr Scott said.
In a statement to the ASX on Wesfarmers said it continues to believe that its proposal to acquire API remains in the best interests of API shareholders and stakeholders and that it will significantly benefit community pharmacists and Priceline franchisees.
It also said it remained committed to the community pharmacy model, as has Woolworths, which supports the community dominance of pharmacies and its strict ownership model in Australia.
Wesfarmers notes that key API stakeholders, including community pharmacists and Priceline franchisees, have expressed concern about API’s Sister Club loyalty club customer data being shared with loyalty programs, where there is significant overlap with product ranges sold in pharmacies.
Mr Scott said any customer data collected by API under a Wesfarmers ownership would not be shared with the FlyBuys loyalty program that is jointly owned by Wesfarmers and Coles.
“This assurance provides API and its community pharmacists, including current and future Priceline franchisees, with comfort that their customer data will be protected from supermarket competitors.”
A spokesman for Woolworths said there was no change to its process and it was continuing to progress with due diligence.
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