Why the Wesfarmers (ASX:WES) share price is wobbling today

Wesfarmers is copping heat from shareholders for its cheap offer on the pharmaceutical retailer.

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The Wesfarmers Ltd (ASX: WES) share price is up and down today after the company’s bid for Australian Pharmaceutical Industries Ltd (ASX: API) faces new pressure from shareholders.

At market open Wesfarmers shares surged to $58.61 before dipping down to $58.01. At the time of writing, the Wesfarmers share price is up 0.47% to $58.70.

Let’s take a look in a little more detail.

New pressure from shareholders

Wesfarmers shareholders are concerned the offer for the pharmaceutical retailer and distributor is too low, and that it opens the gates for rival bids to surface.

Key stakeholders have been outspoken, advocating to lift the bid. They say the offer, “undervalued [Australian Pharmaceutical] and a counter offer was not impossible,” according to yesterday’s Australian Financial Review.

The news comes after 19.3% shareholder Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) gave its seal of approval on the $1.38 per share offer.

Since Monday’s announcement, the API share price skyrocketed almost 20%, reaching a high of $1.38 yesterday.

API is the owner of Priceline Pharmacy and Clear Skincare beauty clinics, both of which operate throughout Australia.

Wesfarmers values the company’s assets at $687 million, excluding $135 million debt on its balance sheet.

As such, the $1.38 per share offer is close to API’s current market price at the time of writing.

Speaking on the proposal on Monday, Wesfarmers managing director Rob Scott said:

If the proposal is successful, API would form the basis of a new healthcare division of Wesfarmers and a
base from which to invest and develop capabilities in the health and wellbeing sector.

The offer is still subject to due diligence, clearance from the ACCC, and board approval from API.

Wesfarmers share price snapshot

The Wesfarmers share price has posted a year-to-date return of ~16%, extending the previous 12 month’s return of 27.68%.

These returns have outpaced the S&P/ASX 200 Index (ASX: XJO)’s return of ~11.7% since 1 January this year.

At the time of writing, Wesfarmers has a market capitalisation of $66.5 billion.

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The author Zach Bristow has no positions 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.

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