Australian Pharmaceuticals (ASX:API) share price lifts following Wesfarmers 19% stake

Wesfarmers has bought nearly a fifth of the company…but it still wants it all.

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The Australian Pharmaceutical Industries Ltd (ASX: API) share price is on the rise after Wesfarmers Ltd (ASX: WES) confirmed it has bought a 19.3% stake in the company.

At the time of writing, shares in the retail pharmacist are trading for $1.54 – 2.33%. The S&P/ASX 200 Index (ASX: XJO) is 0.36% higher, for context.

Wesfarmers has been looking to acquire 100% of API for some months now. The competition for the company recently heated up when Sigma Healthcare Ltd (ASX: SIG) entered the fray, submitting a mostly scrip bid for API.

Let’s take a closer look at today’s news.

Why API shares are in focus

In a statement to the ASX, Wesfarmers confirmed its acquisition of 95.1 million shares in API – or roughly 19.3% of the company. The purchase was made pursuant to an agreement with API’s largest shareholder, Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).

Wesfarmers says this is not the end of its interest in API. The retail conglomerate says it still wishes to purchase 100% of API for $1.55 per share. Wesfarmers also says now that it owns nearly a fifth of API, it will use its voting power to try and deny Sigma from buying the retail pharmacist. When Wesfarmers submitted this bid, the API share price shot up.

The company paid Soul Patts $1.38 per share and has agreed to pay the remainder should its bid for API be successful.

“Wesfarmers continues to see opportunities to invest in and strengthen the competitive position of API and its community pharmacy partners. Exercising our option to acquire 19.3 per cent of API reflects the Group’s commitment to the transaction and the continued progress of the Wesfarmers proposal,” Wesfarmers Managing Director, Rob Scott, said.

API is best known for owning and operating Priceline and Soul Pattinson pharmacies/beauty stores across Australia. It also owns a chain of 57 cosmetic, skin and laser hair removal clinics in Australia and New Zealand. Due to Australian regulations, it operates its pharmacies under a franchise model.

Despite Wesfarmers operating an industrial branch of its business, the company is best known for owning and operating retail brands like Bunnings, Kmart, and Officeworks. Its proposed purchase of API may be the retailers attempt to further diversify itself into more product lines in Australia – in this case, medicine and beauty products.

API share price snapshot

Over the past 12 months, the API share price has increased 48.1%. This is mostly due to the takeover attempts of Wesfarmers and Sigma, however. Year-to-date, shares in the company have risen just over 21%. API has a market capitalisation of about $751 million.

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Motley Fool contributor Marc Sidarous 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 Washington H. Soul Pattinson and Company Limited and 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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