Wesfarmers' (ASX: WES) attempt to diversify its retail offering with one of Australia's leading pharmacy chains is one step closer to getting over the line after entering into a scheme implementation deed (SID) to buy all remaining shares in Australian Pharmaceutical Industries (ASX: API).
It has now been almost four months since Wesfarmers made its first $680 million bid to buy API, which owns the Priceline brand under a community pharmacy model with 470 stores nationwide.
Since then the Perth-based retail and materials giant - known for such brands as Bunnings, Target, Officeworks and Catch.com.au - increased its bid from $1.38 to $1.55 per API share, representing a valuation of approximately $764 million.
Pharmacy network Sigma Healthcare (ASX: SIG) also threw its hat in the ring, but Wesfarmers upped the stakes by buying almost one fifth of API to stack voting more in its favour, ultimately leading Sigma to withdraw late last week.
The API Board has unanimously recommended shareholders vote in favour of the scheme unless a superior proposal comes along, given it represents a 35.4 per cent premium to the company's closing share price before the bidding war began.
The SID includes break fees and reverse break fees of around $7.7 million for either party.
Wesfarmers managing director Rob Scott said the acquisition of API would provide an attractive opportunity to enter the growing health, wellbeing and beauty sector.
"Wesfarmers continues to see opportunities to invest in and 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," Scott said.
"In addition to our discussions with API management, we have engaged with industry stakeholders during due diligence.
"As we have previously stated, Wesfarmers supports the community pharmacy model, including the pharmacy ownership and location rules. Wesfarmers recognises the importance of strong relationships with our trading partners and we look forward to working closely with API’s pharmacy partners, suppliers and other industry stakeholders."
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