Why the Wesfarmers (ASX:WES) share price has been in focus this week

It’s been an interesting week for the Aussie conglomerate. Here are the details

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It’s been a big week for the Wesfarmers Limited (ASX: WES) share price.

Investors have been keeping a keen eye on shares in the Aussie conglomerate after various headlines.

Let’s take a look at why the Wesfarmers share price has received extra attention this past week.

What’s making the headlines?

Wesfarmers made headlines this week following its ‘sweetened’ bid to acquire Australian Pharmaceutical Industries Ltd (ASX: API).

The conglomerate has offered to buy 100% of API’s outstanding shares at $1.55 per share under a revised scheme arrangement.

At the time, Wesfarmers’ new offer represented a 22% premium on API’s closing price. Overall, the new bid values API’s equity at approximately$764 million.

API’s board unanimously recommended the revised bid, subject to parties entering a binding scheme implementation deed.

According to the Australian Financial Review’s Street Talk column, Wesfarmers has already begun its due diligence which will take approximately 4 weeks.

Before proceeding, the deal also requires clearance from the Australian Competition and Consumer Commission (ACCC).

Wesfarmers made its intentions about expanding into the beauty and pharmaceutical sector clear earlier this year.

The conglomerate lodged a $687 million takeover bid for API in July, which was rejected by the pharmaceutical company.

The renewed bid for API has also renewed speculation on other acquisitions Wesfarmers may pursue.

Snapshot of the Wesfarmers share price

Up until recently, the Wesfarmers share price was having a stellar year. However, in the past 3 weeks, shares in the conglomerate have fallen more than 14% from their record highs.

The sell-off coincides with the release of the company’s full-year report for FY21.

Wesfarmers recorded a 10% increase in revenue and an 18.8% jump in EBIT from continuing operations.

Other highlights from the company’s full-year report included:

  • EBIT (after interest on lease liabilities) up 20.7% to $3,550 million;
  • Net profit after tax rose 16.2% to $2,421 million;
  • Operating cash flows down 25.6% to $3,383 million;
  • Fully franked full-year dividend of 178 cents per share, up 17.1% year on year; and
  • Proposed $2.3 billion or $2.00 per share capital return to shareholders.

Despite falling in the past month, the Wesfarmers share price remains more than 12.5% higher for the year.

Shares in the conglomerate closed Friday’s trading session at $57.28, up 0.53% on the day.

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Motley Fool contributor Nikhil Gangaram 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.

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