The Australian Competition & Consumer Commission will not be opposing the acquisition of Australian Pharmaceutical Industries (ASX:API) by Wesfarmers Limited (ASX:WES).
While API is a retailer and wholesaler of beauty and personal care products along with the pharma goods, Wesfarmers is a retail giant, a diversified company engaged in various business operations, such as home improvement and outdoor living, owning Kmart, Target and Catch businesses. These firms too are selling a wide range of over-the-counter pharma and beauty products.
Meanwhile, on the ASX, WES shares were trading at AU$52.890 per share, API shares were trading a tad higher at AU$1.525 per share.
About the Wesfarmers acquisition:
In 2021, Wesfarmers proposed to acquire all shares in API for cash consideration of AU$1.55 per share. Wesfarmers currently owns a 19.3% shareholding in API following the acquisition of 95.1 million shares on 7 October 2021.
With today’s development wherein ACCC has said that it will not oppose the acquisition, Wesfarmers has come a long way to satisfy the SID. The scheme was subject to customary conditions, which include approval to API shareholders, approval from the court, ACCC approval, among other things.
What did the ACCC say?
The ACCC’s review mainly focused on the markets for the retail sale of over-the-counter pharmaceutical and beauty and personal care products.
The financial regulator has said that ACCC’s investigation showed that many large and well-established retailers, such as Chemist Warehouse, Woolworths, and Coles, will compete strongly with Wesfarmers after the acquisition in both the market for over-the-counter pharmaceutical products and the market for beauty & personal care products.
Meanwhile, the ACCC has also maintained its view that the proposed acquisition would not have the effect or likely effect of substantially lessening competition.
There were apprehensions that benefits obtained from the additional customer transaction data via this acquisition would substantially lessen competition.
How is WES performing on the ASX?
At the current share price of AU$52.93 per share, the WES shares are down over 4.45% in the last 12 months. In this year so far (YTD), the stock has fallen nearly 12%.
Shares of WES are down over 17% from the 52-week high of AU$67.20 seen in August last year.
In its FY21 results, the conglomerate said that the Group’s net profit from continuing operations rose 16.2% to AU$2.4 billion. Besides, the company’s ordinary dividend rose 17% to AU$1.78. Nevertheless, the company has also proposed to its shareholders a return of capital of AU$2.00 per share in its 40th annual general meeting.
