The S&P/ASX 200 Index (ASX: XJO) is not having a very merry start to this week of pre-Christmas trading. So far today, the ASX 200 has lost 0.31% and is sitting at 7,281.3 points. But no one seems to have told the Wesfarmers Ltd (ASX: WES) share price.
Wesfarmers shares are, at the time of writing, up 0.34% at a flat $58.91 each. This move comes amid continued speculation over who will win the dramatic bidding war for the shares of Australian Pharmaceutical Industries Ltd (ASX: API). Wesfarmers is currently locked in an epic contest with Woolworths Group Ltd (ASX: WOW) for ownership of API. Both companies have lobbed bids at API shareholders. Woolworths' offer of $1.75 in cash per share remains the highest offer currently on API's table. But Wesfarmers has the added advantage of already owning a 19.1% stake of the company.
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Wesfarmers keep up the pressure
Wesfarmers doesnt appear to be letting up pressure either. According to a recent article in The Australian, Wesfarmers CEO Rob Scott has approached the powerful Pharmacy Guild of Australia lobby group to spruik Wesfarmers' offer. Here's some of what was reportedly in Mr Scott's letter:
We have met many representatives from across the sector and are confident our proposal supports community pharmacists and their businesses… We are confident that with Wesfarmers' capital and support, API can deliver even better products and services to community pharmacists, and Priceline franchisees, that will help them be more competitive and create value over time.
Pointing out the improvements in supply chains and online customer experience that Wesfarmers would bring to API, Scott also highlighted some issues Wesfarmers sees with Woolworths' bid:
We note the non-binding, indicative proposal made by Woolworths Limited to acquire API, and have heard director concerns recently about the competition issues associated with supermarket ownership of API…
Supermarkets are already the largest competitors to pharmacies across diverse 'front of store' categories including non-prescription medicine like pain relief, vitamins and dietary supplements, and personal health and beauty.
Who will win API investors' hearts?
Scott added that Wesfarmers' experience running Woolworths' supermarket rival Coles Group Ltd (ASX: COL) until 2018 "meant it understood the strategic value to supermarkets of health, wellbeing and beauty categories". These concerns, he said, do not apply to Wesfarmers.
It could still be argued that Woolworths remains the underdog in this epic battle, given that Wesfarmers has already said it will use its near-20% stake in API to vote against any proposal from the company. But as long as it has a higher cash offer on the table than Wesfarmers, anything could happen. So if you're a shareholder in any of these companies, make sure to keep an eye on this space going into 2022.
