Wesfarmers (ASX:WES) share price wobbles amid rival bid for API

A bidding war for Australian Pharmaceutical Industries has begun.

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The Wesfarmers Ltd (ASX: WES) share price is wobbling today amid news a rival bid has been placed for Australian Pharmaceutical Industries Ltd (ASX: API).

The fresh takeover offer comes only weeks after Wesfarmers upped its bid for 100% of API’s shares to $1.55 of cash per share, valuing the company at around $764 million.

This morning, Sigma Healthcare Ltd (ASX: SIG) posted a mostly-scrip bid for 100% of API shares. This offer has an implied value of $1.57 per share – indicating Sigma values API at approximately $773 million.

The Wesfarmers share price has spent most of the morning in the red after the news, but it has since regained ground. At the time of writing, the company’s shares have gained 0.16% to trade at $57.45 apiece.

Let’s take a closer look at the bidding war that’s erupted over the operator of Priceline.

Bidding war for API begins

The Wesfarmers share price has had a turbulent start to the week amid the emergence of a new competitor for API.

Wesfarmers and Sigma are now simultaneously undergoing due diligence to win the pharmaceutical company.

Sigma has put a higher bid to API’s board, albeit a mostly scrip one. Sigma’s proposal would see API’s shareholders walking away with 35 cents of cash and 2.05 Sigma shares per API share they hold at the time of the demerger.

As the Sigma share price finished Friday’s session trading at 59.5 cents, the implied value of Sigma’s merger offer is $1.57 per share.

Additionally, Sigma has found at least $45 million worth of annual synergies that could be realised if it merged with API.

At this stage, API’s board has determined that Sigma’s proposal is superior to Wesfarmers’ $1.55 per share takeover offer.

What’s on the table from Wesfarmers?

Wesfarmers’ bid of approximately $773 million was the retail giant’s second for API. API turned down Wesfarmers’ previous offer of $1.38 per share in July.

The Wesfarmers share price fell 0.2% after that knockback but gained 0.5% on the back of its most recent bid.

Further, Wesfarmers previously secured the vote of API’s major shareholder, Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), which holds 19.3% of API’s stock.

Now, Wesfarmers has a head start on due diligence for API. Its due diligence period expires on 16 October.

Wesfarmers share price snapshot

Those interested in the Wesfarmers share price will likely be watching the company closely in the coming weeks.

Shares in the company have gained 11% so far this year and are trading 26% higher than this time last year.

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Motley Fool contributor Brooke Cooper 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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