Wesfarmers makes a move

Wesfarmers has bought nearly 20% of API, in the latest move in the war to acquire the wholesaler

On Thursday Wesfarmers made the announcement that it has acquired 95.1 million shares in Australian Pharmaceutical Industries Limited—representing 19.3% of API’s shares outstanding.

“The acquisition was made pursuant to the Undertaking Agreement entered into on 9 July 2021 with Washington H. Soul Pattinson and Company Limited,” said Wesfarmers in a statement.

Wesfarmers—which holds a minority interest in Coles, a 50% shareholding in Flybuys (the other half owned by Coles) and Officeworks, Kmart, Target and Bunnings—said it remains committed to pursuing its proposal to acquire 100% of API’s shares.

The news follows last week’s move by Sigma Healthcare, which made a takeover offer for API which trumped two previous Wesfarmers bids.

Wesfarmers had made a bid in July, for $1.38 per cash share, which met an unenthusiastic response, with API rejecting it as “undervalued”.

This was followed by a Revised Proposal in mid-September offering $1.55 per share, which API’s Board decided to recommend.

It is this $1.55 per share offer that Wesfarmers intends to continue to pursue, and it says it is progressing with its confirmatory due diligence investigations in support of its proposal.

Last week, Sigma made a conditional non-binding indicative proposal to acquire 100% of API for a combination of cash and scrip. This proposal valued API at $773.5 million.

Sigma said that the API Board had considered its proposal and found it superior to the previous non-binding indicative proposal from Wesfarmers.

In response to the Sigma offer, the Pharmacy Guild said it would be keeping an eye on developments, examining “possible implications”.

Undaunted, Wesfarmers said on Thursday that it “notes the announcement on 27 September 2021 of a proposal by Sigma Healthcare Limited to acquire API”.

Wesfarmers says it is believes that its own proposal is superior to the Sigma proposal and is in the best interests of API shareholders.

It says it does not intend to support, or vote its 19.3% API shareholding in favour of, the Sigma proposal.

Wesfarmers Managing Director Rob Scott said that the Wesfarmers proposal would deliver an attractive premium and certain cash return to API shareholders.

“Wesfarmers continues to see opportunities to invest in and strengthen the competitive position of API and its community pharmacy partners,” he said.

“Exercising our option to acquire 19.3% of API reflects the Group’s commitment to the transaction and the continued progress of the Wesfarmers proposal.”

In addition, Wesfarmers is required to make further payments to WHSP such that WHSP receives total consideration per API share equivalent to that paid under any successful Wesfarmers acquisition of API.

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