Wesfarmers CEO Rob Scott steps up pursuit of Australian Pharmaceutical Industries

Wesfarmers boss Rob Scott has stepped up his campaign to win the battle for Priceline owner Australian Pharmaceutical Industries.

Wesfarmers CEO Rob Scott: ‘We are confident that with Wesfarmers’ capital and support, API can deliver even better products and services to community pharmacists, and Priceline franchisees, that will help them be more competitive and create value over time.’ Picture: Marie Nirme

Wesfarmers boss Rob Scott has stepped up his campaign to win the battle for Australian Pharmaceutical Industries, detailing to the Pharmacy Guild of Australia how the Perth-based conglomerate’s proposal is superior to that of rival suitor Woolworths.

In a letter to Trent Twomey, the president of the Pharmacy Guild, Mr Scott outlined Wesfarmers’ commitment to the community pharmacy model and said he saw a strong alignment between pharmacists and the conglomerate.

“We have met many representatives from across the sector and are confident our proposal supports community pharmacists and their businesses,” Mr Scott said.

“We are confident that with Wesfarmers’ capital and support, API can deliver even better products and services to community pharmacists, and Priceline franchisees, that will help them be more competitive and create value over time.”

The letter comes days after Mr Scott declared Wesfarmers would sit on its 19 per cent stake in API and block any attempt by Woolworths to gain full ownership of API.

Woolworths in early December lobbed a $1.75-a-share takeover offer for API, besting Wesfarmers’ $1.55-a-share proposal.

Wesfarmers could help API improve supply chain capabilities and enhance the online experience for customers, Mr Scott told the Pharmacy Guild, noting that community pharmacists would be the group’s main channel to market for health, personal care and beauty products.

“We note the non-binding, indicative proposal made by Woolworths Limited to acquire API, and have heard director concerns recently about the competition issues associated with supermarket ownership of API,” Mr Scott said.

“Supermarkets are already the largest competitors to pharmacies across diverse “front of store” categories including non-prescription medicine like pain relief, vitamins and dietary supplements, and personal health and beauty.”

Wesfarmers’ historic supermarket experience – it demerged Coles from the group in 2018 – meant it understood the strategic value to supermarkets of health, wellbeing and beauty categories, he added.

“Importantly, Wesfarmers now has a very limited market presence in these categories, allowing us to approach the API acquisition without any material competitive or channel conflict.

“We also understand why pharmacists have raised concerns about Sister Club customer data being shared with supermarkets through loyalty programs, given the significant product overlap.”

Wesfarmers would keep all API customer data separate from Coles, its joint venture partner in Flybuys, if successful in the acquisition, Mr Scott said, as he again made clear his stance on the Woolworths offer.

“As the largest shareholder in API, we remain focused on progressing our proposal and intend to vote against any Woolworths scheme of arrangement. We also do not intend to accept a Woolworths takeover offer, if a formal offer is eventually made.”

Mr Scott earlier in December noted the Woolworths proposal was not an official takeover and said that, 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 is a lot of work that needs to be done on the competition side,” he said.

“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.”

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.

API last traded at $1.76 per share.

Additional reporting: Eli Greenblat