The Wesfarmers Ltd (ASX: WES) share price will be on watch today after the business increased its takeover offer to $1.55 per share for Australian Pharmaceutical Industries Ltd (ASX: API).
The API board is set to unanimously recommend the revised offer subject to no superior offers to land on the table and an independent expert valuation.
API is best known for its Priceline store network and distribution of essential medicines.
What was announced?
Wesfarmers has come to the table with a $1.55 per share offer for API, valuing the business at $770 million.
The revised offer is a 37% premium to the last trading price before the first proposal was announced.
The API board previously rejected Wesfarmers’s initial $1.38 per share cash offer in July. The board cited that the proposal did not reflect the underlying value and growth prospects of the business.
This time, the board is set to recommend the offer and allow Wesfarmers to comb over the books.
Additionally, major shareholder Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) who owns 19.3% of API is set to vote in favour of the offer.
The offer is still subject to a number of conditions being met including:
- Satisfactory due diligence by Wesfarmers
- No superior proposal being received
- Clearance by the Australian Competition and Consumer Commission (ACCC)
- Unanimous board recommendation
- A binding offer by Wesfarmers
Why is Wesfarmers acquiring API?
Wesfarmers is looking to expand its activities into the pharmacy store and distribution network.
The business will be able to leverage its extensive supply chains, product range and online capabilities to enhance API’s value proposition.
Wesfarmers Managing Director Rob Scott said:
““Wesfarmers supports the community pharmacy model, including the pharmacy ownership and location rules… 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.”
What does this mean for shareholders?
Nothing for now. The proposal is still subject to a number of conditions.
If the deal goes through, API shareholders will receive $1.55 per share minus any distributions made.
No action is required by Wesfarmers shareholders, as API will be consumed into the broader Wesfarmers group.
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