Retailer seizes big stake in API

RETAIL titan Wesfarmers has upped its ante in the takeover battle for Priceline owner, Australia Pharmaceutical Industries, seizing a 19.3 per cent stake in the company, despite facing competition from a “more favourable” bid.

Wesfarmers could only exercise that option in absence of a superior bid, and API’S board is currently assessing another offer from Australia’s biggest pharmaceutical wholesaler Sigma Healthcare.

While the API board said Sigma’s cash and scrip bid – worth about $773m or $1.57 a share at the time it made its offer – was more favourable than Wesfarmers’s all cash offer of $1.55, it is yet to label it superior.

Regardless, Wesfarmers pulled the trigger on acquiring the 19.3 per cent stake in API, belonging to Washington H. Soul Pattinson on Thursday morning, in an apparent effort to accelerate takeover talks.

“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 chief executive Rob Scott said.

It is understood Wesfarmers was concerned a deal could be delayed by months, with Sigma’s biggest shareholder Allan Gray demanding a shareholder vote on the takeover proposal, which if successful would be subject to competition regulatory approval.

Wesfarmers seized on API’S vague language when Sigma lobbed its bid last week. While API said Sigma’s bid was “favourable” it stopped short of recommending Sigma’s offer, and it was that wording that Wesfarmers believed gave it permission to pounce.

Galvanising its decision to exercise the call option was Sigma’s shares sliding to 57c on Wednesday, which reduced the value of its bid by 5c to $1.52 a share.

“Wesfarmers exercised its option to acquire the shares from WHSP under the terms of the undertaking agreement following the announcement of Sigma’s proposal, which the API board has not recommended,” Wesfarmers said.