The Wesfarmers Ltd (ASX: WES) share price is gaining in morning trade. This comes despite potential loyalty program competition concerns in relation to its proposed merger with the owner of Priceline Pharmacy.
At the time of writing, the Wesfarmers’ share price is sitting at $58.99. — up 0.65% on yesterday’s close.
Loyalty is rare, and that might be a problem
Loyalty programs are incredibly valuable businesses. These programs make customers feel recognised and reward them for being loyal to a specific company. At the same time, they provide rich data for targeted advertising, increasing the likelihood of customer conversion and higher sales.
With that in mind, it would be understandable for the Australian Competition & Consumer Commission (ACCC) to be wary of Wesfarmers’ proposed amalgamation with Australian Pharmaceutical Industries Ltd (ASX: API). As a result, the Wesfarmers’ share price is front of mind for investors today.
According to The Australian Financial Review, Wesfarmers’ dealmakers, lawyers, and bankers have poured a lot of time into a convincing argument for why the merger should be allowed to proceed.
The possible roadblock takes form in Wesfarmers’ 50% interest in flybuys. The sizeable loyalty program boasts 6.8 million active households. Meanwhile, API’s Sister Club has more than 7 million members – making it one of the largest health and beauty retail loyalty programs in Australia.
As a result, the ACCC will likely consider whether the merger of the two would give Wesfarmers an unfair advantage.
Reportedly, Wesfarmers is expected to argue it would keep the two programs separate. That would mean Flybuys sticks to Coles, Kmart, Target et al, while Sister Club would remain in place for Priceline.
Wesfarmers share price recap
It has been a cracking year for the Wesfarmers’ share price. So far in 2021, shares in the diversified company have gained 13.8%. Pleasingly for shareholders, this is a 4% outperformance of the S&P/ASX 200 Index (ASX: XJO) before dividends.
More recently, the company’s shares have wobbled following the API bid. Shareholders hold a concern that the bid is too low, potentially inviting rival bids to enter the fray.
The post Wesfarmers (ASX:WES) share price rising amid competition concerns appeared first on The Motley Fool Australia.
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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 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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