Australian Pharmaceutical Industries (ASX: API) engages in the wholesale, product delivery, retail services, marketing programs, and business advisory services. It operates through the Australia and New Zealand segments. The Australia segment involves the distribution of pharmaceutical, medical, health, beauty, and lifestyle products to pharmacies. The New Zealand segment engaged in the manufacturing and owner of rights of pharmaceutical medicines and consumer toiletries.
Australian Pharmaceutical Industries today provided an update on its recent annual strategic review and its anticipated financial results for the year ending 31 August 2021. This update outlines API’s decision to exit its manufacturing operations in New Zealand allowing API to focus resources and investments on its distribution and retail businesses. Following its detailed strategic review, the API Board has decided to increase the focus of the company on its Pharmacy Distribution and two retail businesses, Priceline Pharmacy and Clear Skincare.
Why is the API Share Price Surging On ASX?
API announced today that it has received an unsolicited, non-binding, conditional indicative proposal from Wesfarmers Limited (ASX:WES) to acquire 100% of API shares by way of a scheme of arrangement. The offer price by WES is said to be $1.38 a share – representing a premium of 18.7% to API shares’ VWAP for the 3 months prior to 9 July 2021 and a premium of 20.5% to API’s closing share price on 9 July 2021.
Wesfarmers has informed API that it has entered into an agreement with API’s shareholder, Washington H. Soul Pattinson and Company Limited which holds a 19.3% interest in API. In the absence of a superior proposal as determined by the API Board, the arrangement includes an undertaking to vote in favour of the Indicative Proposal (or an improved proposal from Wesfarmers). The agreement also includes an option for Wesfarmers to acquire WHSP’s shares in the event Wesfarmers intends to match or exceed any competing proposal which API receives.
The Indicative Proposal is subject to conditions such as – Satisfactory completion of Wesfarmers’ confirmatory due diligence on API, Execution of a Scheme of Implementation Deed, Unanimous public recommendation of the transaction by the API Board, Receipt by Wesfarmers of required regulatory approvals, and of course Clearance from the Australian Competition and Consumer Commission.
The reaction by the market has been fantastic to say the least. API shares have been surging all day, and at the time of writing this, API shares have skyrocketed by 19% and are currently trading at $1.37 a share – just shy of the offer price submitted by WES.
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