According to the Sydney Morning Herald, Wesfarmers has entered the pharmacy industry with a bid of A$687 million for Priceline.
Wesfarmers, owner of Kmart, Bunnings and Officeworks, has made a surprise bid - A$687 million for Priceline of Australian Pharmaceutical Industries (API), an Australian drug retailer and distributor, which it hopes will be worth A$25 billion in Australia occupies a place in the pharmacy industry.
Wesfarmers chief executive Rob Scott said there would be no attempt to replicate and revive Woolworths' plans to open pharmacies in its stores.
Shoppers don't want to see prescription drugs on the shelves of Target or Officeworks, and Rob Scott stressed that Wesfarmers will maintain its community pharmacy model if the bid is successful.
Wesfarmers was keen to expand into healthcare after spinning off coal mining and spinning off Coles, but Mr Scott ruled out the possibility of a US-style pharmacy model selling prescription drugs at big retailers such as Walmart.
Mr Scott said: "We see this business as very independent and we think it is important to have a dedicated team and dedicated capabilities to support this business. Wesfarmers supports the community pharmacy model, including pharmacy ownership and positioning, and connects API with its community The pharmacy partner relationship is seen as one of its key strengths.”
Mr. Scott said: “What’s exciting about the API is that it creates a whole new network where we can work with Priceline franchisees as well as other communities throughout the community. Pharmacists explore opportunities together. That's our focus."
The federal government has banned large retailers from operating pharmacies since 1990.But that hasn't stopped some from trying to overturn the law, in the case of Woolworths, which even registered the "Pharmacy-in-Supermarket" trademark and renewed it in 2013 after a previous application lapsed .
API owns and operates the Priceline Pharmacy in Australia, as well as the Clear Skin Care Clinic and many health and beauty product brands sold under the Priceline brand. Wesfarmers' bid represents a 21 per cent premium to API's last closing price of A$1.145 per share, valuing the business at A$687 million.
API's largest shareholder, Washington H. Soul Pattison, which owns 19.3% of API, publicly supported the acquisition and granted Wesfarmers a call option on its stock.
Washington H. Soul Pattinson said Wesfarmers presents a great opportunity for API shareholders. Wesfarmers has a strong track record in running retail businesses, as evidenced by its previous ownership of Coles, and its current ownership of Bunnings, Officeworks and Kmart.
Wesfarmers' offer of $1.38 per share is a level not seen since before the outbreak and since the prolonged lockdown, which has had a huge impact on Priceline stores, particularly in the CBD.
Mr Scott said the offer was "very attractive", noting the company had not traded at $1.38 a share since January last year, also underscoring some of the pressures related to the pandemic, such as weak trading in CBD stores may still be going on.
API said it would lose about $1 million a week due to the ongoing lockdown in Sydney, and about $17 million to $19 million in revenue due to ongoing lockdowns across Australia in June and July.
API also lowered its earnings forecast due to the ongoing lockdown in Sydney, telling shareholders that it now expects its full-year profit to be between A$66 million and A$68 million, down from an earlier forecast of A$75 million.
Roughly 72% of non-pharmacy Priceline stores and 75% of Clear skin care clinics have closed in the latest round of COVID-19 restrictions.
Wesfarmers is following a familiar playbook trying to buy a large chain of pharmacies. Two years ago, online retail giant Amazon paid $753 million for PillPack, a U.S. pharmacy chain.
Comprehensive compilation/reprint: Cat Uncle Xu Chao
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