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A $764 million bid from Wesfarmers (ASX: WES) to acquire the owner of Priceline has been given the all-clear by the competition regulator today, meaning the deal is nearly completed.
According to the Australian Competition and Consumer Commission (ACCC), Wesfarmers bringing Australian Pharmaceutical Industries (ASX: API) into its fold would not reduce competition in the pharmaceuticals sector, given other large retailers in the space that would compete post-acquisition.
In addition to Priceline, API also owns the anti-ageing, acne and laser clinics Clear Skincare and Soul Pattison Chemist.
“Our investigation showed that there are many large and well-established retailers, including Chemist Warehouse, Woolworths and Coles, that 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,” ACCC commissioner Stephen Ridgeway said.
“We consider that API’s competitors will continue to compete strongly with Wesfarmers after the acquisition.”
In its review, the ACCC primarily focused on the markets for the retail sale of over-the-counter pharmaceutical and beauty & personal care products - spaces Perth-based Wesfarmers operates in via its Kmart, Target and Catch businesses.
The ACCC also considered the potential effects on competition of Wesfarmers owning both the Priceline Sister Club and 50 per cent of Flybuys - both rewards programs for consumers.
Specifically, the regulator looked at whether the proposed acquisition would reduce competition by incentivising and locking customers into shopping at Wesfarmers-aligned pharmacies, and providing Wesfarmers with increased access to customer data.
“Wesfarmers acquiring the Priceline Sister Club loyalty scheme will not have a lock-in effect on consumers in any market,” Ridgeway confirmed.
“We also consider the benefits obtained from the additional customer transaction data do not appear to be so strong as to result in a substantial lessening of competition from the acquisition.”
“Customers generally do not only join one loyalty scheme, and major competitors to Wesfarmers after the acquisition will have, or could start, their own customer loyalty schemes.”
The watchdog also said it consulted a range of stakeholders during the investigation, noting most did not have any concerns.
With ACCC approval, the merger of two retail giants looks set to go ahead as long as API shareholders vote in favour of the deal.
Once that hurdle is overcome, Wesfarmers expects completion of the transaction to occur around the end of the first quarter of the 2022 calendar year.
Shares in WES are down 1.59 per cent to $52.54 per share at 11.09am AEDT, while API is up by 0.33 per cent to $1.52 per share.
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