Wesfarmers (ASX:WES) now has control of API, but is the real fight just beginning?

Could Wesfarmers face some challenges ahead?

| More on:
Elderly couple look sideways at each other in mild disagreement

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

Key points

  • The Wesfarmers share price lifted nearly 1% today 
  • Wesfarmers has received court approval for the acquisition of Australian Pharmaceutical Industries 
  • Working with franchisees may present a challenge in the future, according to a former CEO

The Wesfarmers Ltd (ASX: WES) share price finished in the green today amid another acquisition milestone.

Wesfarmers shares were trading at $50.68 at market close, a 0.7% gain. In comparison, the S&P/ASX 200 Index (ASX: XJO) slipped 0.22%.

Let's take a look at what could impact Wesfarmers in the future.

What challenges lie ahead?

Wesfarmers recently received shareholder approval to take over Australian Pharmaceutical Industries (ASX: API), the owner of Priceline. Today, the Federal Court approved the scheme of arrangement for this acquisition.

However, many of API's Priceline network pharmacies are independently owned franchises. This means Wesfarmers will need to work with 1400 independent retailers, The Financial Review reported.

The publication quoted former financial services chief executive Andrew Reitzer, who has previously said working with independently owned retailers was like "herding cats".

The problem with this business model is that independent retailers are exactly that – fiercely independent. They have strong opinions on what works best for their business and don't like being told what to do and when to do it.

Wesfarmers CEO Rob Scott has acknowledged the differences working with franchises but also recognises the similarities, the publication reported. He said:

There are differences in terms of managing a successful franchise group, but there are a lot of basic principles around product, pricing, supply chain, digital engagement and e-commerce that will still be very relevant.

API shares will be suspended from the close of trading on 22 March.

WAM Leaders Ltd (ASX: WLE) portfolio manager John Ayoub has recently named Wesfarmers as one of five reliable shares that can ride out 2022 volatility.

Wesfarmers share price snapshot

The Wesfarmers share price has climbed 0.14% in the past 12 months but lost 14.54% in the year to date.

Over the past month, Wesfarmers shares have jumped 0.54% and are 3.05% higher in the last week.

Wesfarmers has a market capitalisation of about $57.5 billion based on the current share price.

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 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 Consumer Staples & Discretionary Shares

A young man punches the air in delight as he reacts to great news on his mobile phone.
Consumer Staples & Discretionary Shares

A2 Milk shares rocket 18% on guidance upgrade and big dividend news

The infant formula company is finally going to start paying dividends to shareholders.

Read more »

A man in a suit face palms at the downturn happening with shares today.
Consumer Staples & Discretionary Shares

Why is this ASX 300 stock crashing 15% today?

Let's see how this popular stock is performing so far in FY 2025.

Read more »

Happy couple laughing while shopping in supermarket
Consumer Staples & Discretionary Shares

Coles shares: Broker says the 'risk-reward is attractive'

Ord Minnett has good things to say about the supermarket giant following its quarterly update.

Read more »

A man looks a little perplexed as he holds his hand to his head as if thinking about something as he stands in the aisle of a supermarket.
Consumer Staples & Discretionary Shares

Down 20% this year, can Woolworths shares catch a break?

The headlines continue this week.

Read more »

A man looks sadly away from his computer screen as he holds a slice of pizza in his hand with an open pizza box in front of him on his desk.
Consumer Staples & Discretionary Shares

3 reasons this expert is selling Domino's shares now

Down 48% in 2024, why this investing expert recommends selling Domino’s shares.

Read more »

a car driver sits up and looks alert with wide eyes and an expression of concentration while he holds the wheel of a car.
Share Fallers

Why this ASX All Ordinaries stock just crashed 24%!

Investors are punishing the ASX All Ords company today. Let’s find out why.

Read more »

woman holding man's hand as he falls representing ups and downs of ASX investing
Consumer Staples & Discretionary Shares

Why did this ASX 200 stock just crash 11%?

Investors appear nervous about a $475 million acquisition.

Read more »

Man pointing at a blue rising share price graph.
Earnings Results

Guess which ASX All Ords share is soaring on 21% FY 2024 growth

Investors are piling into the ASX All Ords share today. Let’s find out why.

Read more »