Pharmacy Daily | Wesfarmers offer undervalues API

WESFARMERS' $667 million bid to acquire pharmacy wholesaler, Australian Pharmaceutical Industries (API) falls significantly short of the market rate, the API's Board believes.

In a statement to the Australian Securities Exchange (ASX) this morning the Board said that after reviewing the offer it had "unanimously concluded that the indicative proposal undervalues API, is not compelling and is not in the best interests of API shareholders" (PD breaking news).

"The Board notes that the indicative proposals implies a premium of 18.7% to the three-month volume weighted average price (VWAP), which is significantly below the Australian market average for transactions of this nature," the company said.

API described the bid as "opportunistic" given the impact the COVID-19 pandemic and related lockdowns have had on the business, but stressed its "wholesale and retail businesses are strategically well positioned in the growing health, wellness and beauty sector".

The Board forecast "substantial medium-term growth in Priceline's earnings contributions", noted the "continued rollout of Priceline Pharmacy franchise stores", and the "attractive outlook for discretionary health and beauty spending as COVID restrictions unwind", while also highlighting the strength of the banner's digital health and beauty offering.

Increased certainty of additional funding provided to API's pharmacy distribution business through the remaining four years of the Seventh Community Pharmacy Agreement alongside the resetting of generics supply and Pfizer's decision to return to mainstream Community Service Obligation wholesalers, were identified as reasons to reject the bid.

"The Board will only progress a change of control transaction on terms that recognise the fundamental value of API and are in the best interests of API shareholders as a whole," the company said.