Wesfarmers (ASX:WES) share price wobbles amid rival bid for API

A bidding war for Australian Pharmaceutical Industries has begun.

| More on:
Rival hands reaching upward for a company trophy or prize.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Wesfarmers Ltd (ASX: WES) share price is wobbling today amid news a rival bid has been placed for Australian Pharmaceutical Industries Ltd (ASX: API).

The fresh takeover offer comes only weeks after Wesfarmers upped its bid for 100% of API's shares to $1.55 of cash per share, valuing the company at around $764 million.

This morning, Sigma Healthcare Ltd (ASX: SIG) posted a mostly-scrip bid for 100% of API shares. This offer has an implied value of $1.57 per share – indicating Sigma values API at approximately $773 million.

The Wesfarmers share price has spent most of the morning in the red after the news, but it has since regained ground. At the time of writing, the company's shares have gained 0.16% to trade at $57.45 apiece.

Let's take a closer look at the bidding war that's erupted over the operator of Priceline.

Bidding war for API begins

The Wesfarmers share price has had a turbulent start to the week amid the emergence of a new competitor for API.

Wesfarmers and Sigma are now simultaneously undergoing due diligence to win the pharmaceutical company.

Sigma has put a higher bid to API's board, albeit a mostly scrip one. Sigma's proposal would see API's shareholders walking away with 35 cents of cash and 2.05 Sigma shares per API share they hold at the time of the demerger.

As the Sigma share price finished Friday's session trading at 59.5 cents, the implied value of Sigma's merger offer is $1.57 per share.

Additionally, Sigma has found at least $45 million worth of annual synergies that could be realised if it merged with API.

At this stage, API's board has determined that Sigma's proposal is superior to Wesfarmers' $1.55 per share takeover offer.

What's on the table from Wesfarmers?

Wesfarmers' bid of approximately $773 million was the retail giant's second for API. API turned down Wesfarmers' previous offer of $1.38 per share in July.

The Wesfarmers share price fell 0.2% after that knockback but gained 0.5% on the back of its most recent bid.

Further, Wesfarmers previously secured the vote of API's major shareholder, Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), which holds 19.3% of API's stock.

Now, Wesfarmers has a head start on due diligence for API. Its due diligence period expires on 16 October.

Wesfarmers share price snapshot

Those interested in the Wesfarmers share price will likely be watching the company closely in the coming weeks.

Shares in the company have gained 11% so far this year and are trading 26% higher than this time last year.

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Mergers & Acquisitions

two men in business suits sit across from each other at a table with a chess board on it. Both hold their hands to their chins and look down in serious contemplation of their next move.
Resources Shares

'Not ruled out': Could BHP still buy Anglo-American?

This mega-deal might not be as dead as it looks.

Read more »

Happy couple looking at a phone and waiting for their flight at an airport.
Travel Shares

Flight Centre share price higher on acquisition news

The travel agent is betting big on cruises. Here's what you need to know.

Read more »

A young woman with her mouth open and her hands out showing surprise and delight as uranium share prices skyrocket
Consumer Staples & Discretionary Shares

Myer and Premier Investments shares jump on huge merger news

The two retailers are combining some of their operations. Let's dig deeper into the plan.

Read more »

a woman drawing image on wall of big fish about to eat a small fish
Mergers & Acquisitions

Guess which $9 billion company is acquiring another ASX stock

This big fish is looking to acquire a small fish in a $45 million deal.

Read more »

Two male ASX investors and executives wearing dark coloured suits sit at a table holding their mobile phones discussing the highest trading ASX 200 shares today
Mergers & Acquisitions

TPG Telecom shares rise on $5.2b asset sale to Vocus

The telco is unlocking value by divesting assets. Here's what's happening.

Read more »

A man slumps crankily over his morning coffee as it pours with rain outside.
Technology Shares

Why are Appen shares sinking today?

Let's see what is going on with this high-flying tech stock today.

Read more »

A silhouette shot of two business man shake hands in a boardroom setting with light coming from full length glass windows beyond them.
Mergers & Acquisitions

Rio Tinto share price rises on $10b Arcadium Lithium takeover deal

Management believes the deal makes it a global leader in energy transition commodities.

Read more »

A man has a surprised and relieved expression on his face. as he raises his hands up to his face in response to the high fluctuations in the Galileo share price today
Mergers & Acquisitions

Arcadium Lithium shares rocket 46% on Rio Tinto takeover approach

The mining giant could soon become the third largest lithium supplier.

Read more »