Two months after it rejected a takeover bid from Wesfarmers, API has now welcomed a new bid from the owner of Bunnings and Kmart
Wesfarmers announced on Thursday that it has entered into a Process Deed with Australian Pharmaceutical Industries regarding a proposal to acquire 100% of its shares.
The news comes two months after the Board of API knocked back a previous bid from the retailing giant, which holds a minority interest in Coles supermarkets through a subsidiary, a 50% shareholding in the loyalty and data company Flybuys (the other half owned by Coles) and which owns Officeworks, Kmart, Target and Bunnings.
Wesfarmers had announced a bid for API in mid-July, which API’s Board rejected as “undervalued”.
This bid had offered to acquire 100% of API’s shares for $1.38 cash per share.
The new Revised Proposal includes an offer of $1.55 per share.
This represents a 37% premium to API’s one-month volume weighted average price of $1.133 per share to 9 July 2021, prior to the initial Wesfarmers offer.
The Revised Proposal allows for the payment of fully franked dividends up to a maximum of five cents per API share, including any final dividend declared for the financial year ended 31 August 2021, with the cash consideration of $1.55 to be reduced by the cash component of any such dividends.
The API Board has stated that it intends to unanimously recommend the Revised Proposal.
This is subject to the parties entering into a binding Scheme Implementation Deed on terms no less favourable than the Revised Proposal following completion of Wesfarmers’ confirmatory due diligence, no superior proposal being received and an independent expert concluding (and continuing to conclude) that the Revised Proposal is in the best interests of API shareholders.
As previously announced, API’s major shareholder Washington H. Soul Pattinson and Company
has agreed to vote its 19.3% shareholding in API in favour of Wesfarmers’ Revised Proposal.
WHSP has also granted a call option in respect of its API shares in favour of Wesfarmers.
“This revised offer better reflects the strength and potential of our stable of businesses that
have been built by the efforts and passion of all of our people within API,” said API’s CEO and Managing Director, Richard Vincent.
“Aligned with our vision of ‘enriching life,’ we remain firmly focused on making a difference for all our customers and trading partners.”
Wesfarmers Managing Director Rob Scott said that the Revised Proposal would deliver an attractive
premium and certain cash return to API shareholders.
“Wesfarmers supports the community pharmacy model, including the pharmacy ownership and location rules,” Mr Scott said.
“If the proposal is successful, we see opportunities to invest to 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.
“API would also provide the basis of a new Healthcare division of Wesfarmers and a platform from which to invest and develop capabilities in the growing health, wellbeing and beauty sector.”
Wesfarmers’ Revised Proposal assumes that the performance of API is consistent with the earnings
guidance announced on 12 July 2021, including the earnings impacts from the extension of COVID-19 related restrictions beyond the end of July 2021.
Under the Process Deed, API has granted Wesfarmers until 16 October 2021 to undertake exclusive
confirmatory due diligence and negotiate a SID reflecting the key terms of the Revised Proposal.
The Revised Proposal is conditional upon the satisfaction of conditions including the completion of
confirmatory due diligence, entry into a SID, obtaining ACCC clearance and the approval of API