* 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
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
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
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)