Could Wesfarmers buy Chemist Warehouse?

Speculation about the future of Chemist Warehouse is back, with one pundit suggesting a sale could be more likely than a listing

In 2017, reporters from the Australian Financial Review began to speculate that the discount giant could be getting ready to float, with its decision-makers meeting with fund managers and investment bankers.

While in March 2018 co-founder Jack Gance said Chemist Warehouse was not interested in an initial public offer, the rumours continued, and in August 2019, the AFR reported that a potential float could take place in late 2020, around nine months after the original February date speculated about at the time.

It reported that Rothschild Australia, the Australian operation of the global Rothschild & Co group, which offers services in global advisory, wealth and asset management, and merchant banking, had been linked to the pharmacy group.

It was understood at the time that Rothschild’s bankers had taken on a financial/strategic advice role.

Now, The Australian Business Review Dataroom editor Bridget Carter is suggesting there could be another way Chemist Warehouse is considering moving forward.

“An initial public offering is believed to be not the only divestment option now up for consideration by Chemist Warehouse, with suggestions in the market that the $5bn pharmacy giant is in talks with at least one suitor,” she writes.

“The company had earlier hired Rothschild to prepare the business for a listing late this year or next year, but now the thinking is that a sale is more likely than a float in a year in which the group’s retail sales have been booming and proving defensive against the COVID-19 pandemic.”

She writes that Wesfarmers could be a “logical” contender and “may be keen on trying to acquire the business at a time when other foreign suitors may struggle to embark on such an acquisition, given that the travel restrictions make on-the-ground due diligence a near impossible feat”.

However, “Chemist Warehouse is also a highly entrepreneurial operation and might not operate well bound by the restrictions of a corporate environment,” Ms Carter writes.

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