Wesfarmers (ASX:WES) share price dips as API battle heats up

The battle for Australian Pharmaceutical Industries is intensifying. Here are the details…

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The Wesfarmers Ltd (ASX: WES) share price is in the red on Tuesday. This follows a new development in the tussle for the right to buy Priceline Pharmacy owner Australian Pharmaceutical Industries Ltd (ASX: API).

At the time of writing, shares in the diversified conglomerate are fetching a price of $54.07, down 0.68%. However, the latest news more so involves an action carried out by fellow API bidder, Sigma Healthcare Ltd (ASX: SIG).

Let’s dive into what is going on with the Wesfarmers share price today.

No more due diligence for you

The 111-year-old Australian pharmaceutical retailer API has the luxury of choosing between two different suitors. However, the latest revelation might mean one of those is removed from the equation.

According to the Australian Financial Review, Sigma Healthcare has decided to close its data room off to API. This means API can no longer review Sigma’s financials, contracts, etc. Considering Sigma’s merger proposition involved a scrip portion to the deal, it was important for API to run its own checks and balances on what it might be getting itself into.

Reportedly, the action was spurred on by Wesfarmers’ exercising its option to acquire a 19.3% stake in the pharmaceutical retailer. On 7 October, 95.1 million API shares swapped hands from Washington H. Soul Pattinson and Co Ltd (ASX: SOL) to Wesfarmers. Despite this, the Wesfarmers share price slipped 0.29% on the news.

Likely, Sigma has been put on the back foot after the large partial acquisition. In turn, the company has gone on the defence as a Wesfarmers takeover looks more likely.

Furthermore, without access to Sigma’s data room, how API is expected to carry out its own due diligence remains a mystery. Although, a formal announcement has not yet been made by either company to the ASX.

Wesfarmers share price recap

It has been a challenging past 7 weeks for the Wesfarmers share price. Over this period, shares in the multi-billion dollar company have sunk by about 18%. It seems investors weren’t pleased with the moderating sales growth in the company’s FY21 full-year result. Additionally, the warning of supply chain disruptions is likely lingering in the minds of the market.

Despite these challenges, the Wesfarmers share price has increased by 5% since the beginning of the year. Unfortunately, this means Wesfarmers shares have underperformed the S&P/ASX 200 Index (ASX: XJO), with the benchmark delivering an 8.8% rise year-to-date.

Finally, Wesfarmers currently holds a market capitalisation of $61.7 billion. Astonishingly, that is more than 45 times greater in size than API and Sigma combined.

Should you invest $1,000 in Wesfarmers right now?

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Motley Fool contributor Mitchell Lawler 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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