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    WOW   AU000000WOW2

WOOLWORTHS GROUP LIMITED

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Australia's Woolworths makes $613 mln drugstore play, taking on Wesfarmers

12/01/2021 | 06:22pm EST

* API grants Woolworths due diligence

* Woolworths offer about 13% higher than Wesfarmers' bid

* API shares hit over three-year high

SYDNEY/BENGALURU, Dec 2 (Reuters) - Top Australian grocer Woolworths Group made a $613 million approach for No. 1 drugstore chain Australian Pharmacutical Industries, besting an already-agreed buyout from retail giant Wesfarmers and sending the target's shares soaring.

The 11th-hour move from Woolworths sets the scene for a bid war between Australia's two largest retail companies as they look to grow beyond pandemic-related stockpiling while building on their existing coast-to-coast distribution networks.

A month after API signed a A$764 million ($543 million) buyout agreement with Australian Kmart, Target and Officeworks owner Wesfarmers, Woolworths proposed paying 20 cents a share more. API, owner of Priceline and Soul Pattinson pharmacies, said the Woolworths option was better and allowed it to conduct due diligence.

The Woolworths move sent shares of API up as much as 18% on Thursday, trading briefly higher than its A$1.75 offer, as investors braced for a possible counteroffer from Wesfarmers, Australia's ninth-largest company by market value.

"It is a case of looking for areas of growth where they can add value," said Sean Sequeira, chief investment officer at Australian Eagle Asset Management.

"You did see over the last few years that in difficult times healthcare spend has been quite resilient. It's not highly cyclical."

Wesfarmers was not immediately available for comment. The conglomerate, which also owns the Bunnings hardware chain, holds 20% of API which is nearly enough to block a takeover since it needs approval from owners of 75% of the pharmacy chain's shares.

Woolworths said it may opt for a different deal structure - a formal takeover offer rather than a deal that was pre-agreed with API's board, as it was currently suggesting - that would require approval from just 50.1% of the target's shareholders.

Under the already-signed deal with Wesfarmers, a fee of A$7.7 million may be due if either of the parties walked away. API did not specify whether it expected that "break fee" to be payable if it went with Woolworths instead.

Woolworths CEO Brad Banducci said there was a "compelling strategic rationale" behind the move on API, with the benefits to be reinvested into growing the pharmacutical business.

($1 = 1.4069 Australian dollars) (Reporting by Byron Kaye in Sydney and Sameer Manekar in Bengaluru; Editing by Rashmi Aich and Stephen Coates)


ę Reuters 2021
Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / CANADIAN DOLLAR (AUD/CAD) 0.13% 0.90313 Delayed Quote.-1.58%
AUSTRALIAN DOLLAR / JAPANESE YEN (AUD/JPY) -0.71% 81.67 Delayed Quote.-1.57%
AUSTRALIAN DOLLAR / NEW ZEALAND DOLLAR (AUD/NZD) 0.11% 1.07017 Delayed Quote.0.75%
AUSTRALIAN DOLLAR / SWISS FRANC (AUD/CHF) -0.13% 0.6533 Delayed Quote.-0.06%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) -0.47% 0.7182 Delayed Quote.-0.62%
AUSTRALIAN PHARMACEUTICAL INDUSTRIES LIMITED -0.66% 1.51 Delayed Quote.-12.72%
BRITISH POUND / AUSTRALIAN DOLLAR (GBP/AUD) 0.15% 1.88686 Delayed Quote.1.10%
EURO / AUSTRALIAN DOLLAR (EUR/AUD) 0.67% 1.57818 Delayed Quote.0.15%
SIGMA HEALTHCARE LIMITED -2.04% 0.48 Delayed Quote.0.00%
WESFARMERS LIMITED -2.27% 53.07 Delayed Quote.-10.51%
WOOLWORTHS GROUP LIMITED -0.94% 34.75 Delayed Quote.-8.58%
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Financials
Sales 2022 59 164 M 42 492 M 42 492 M
Net income 2022 1 429 M 1 026 M 1 026 M
Net Debt 2022 13 515 M 9 706 M 9 706 M
P/E ratio 2022 29,9x
Yield 2022 2,51%
Capitalization 41 939 M 30 218 M 30 121 M
EV / Sales 2022 0,94x
EV / Sales 2023 0,91x
Nbr of Employees 210 067
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Mean consensus HOLD
Number of Analysts 14
Last Close Price 34,75 AUD
Average target price 37,28 AUD
Spread / Average Target 7,27%
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Managers and Directors
Bradford Banducci Chief Executive Officer, MD & Executive Director
Stephen Harrison Group Chief Financial Officer
Gordon McKellar Cairns Independent Chairman
John Hunt Chief Information Officer
Rob McCartney Chief Medical Officer
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