Wesfarmers (ASX:WES) share price higher after receiving API takeover boost

a man sits back from his laptop computer with both hands behind his head as though he is greatly satisfied with a smile on his face.

The Wesfarmers Ltd (ASX: WES) share price is pushing higher on Friday morning.

In early trade, the conglomerate’s shares are up 2% to $59.30.

Why is the Wesfarmers share price rising today?

There have been a couple of catalysts for the rise in the Wesfarmers share price on Friday.

One is the Australian share market’s rebound from a severe selloff on Thursday. Investors appear to believe the selling was an overreaction and are back buying shares again this morning.

Also giving the Wesfarmers share price a boost is news that Woolworths Group Ltd (ASX: WOW) has withdrawn its competing takeover approach for pharmacy chain operator Australian Pharmaceutical Industries Ltd (ASX: API).

Woolworths became the favourite to acquire the Priceline owner late last year when it outbid Wesfarmers with its $1.75 per share proposal. This compared to Wesfarmers’ offer of $1.55 per share.

However, following a period of due diligence, Woolworths was unable to validate the financial returns it requires in line with its capital allocation framework. As such, it has withdrawn its proposal and put Wesfarmers back in pole position.

And while Wesfarmers has not commented on the news, API has released an announcement. It advised that the agreement with Wesfarmers “remains in place and is on track for completion in the first quarter of calendar year 2022.”

Why is Wesfarmers wanting to acquire API?

Last year Wesfarmers’ Managing Director, Rob Scott, revealed the rationale for the acquisition.

He said: “Wesfarmers supports the community pharmacy model, including the pharmacy ownership and location rules. If the proposal is successful, we see opportunities to invest to strengthen the competitive position of API and its community pharmacy partners by expanding ranges, improving supply chain capabilities and enhancing the online experience for customers.”

“API would also provide the basis of a new Healthcare division of Wesfarmers and a platform from which to invest and develop capabilities in the growing health, wellbeing and beauty sector,” Mr Scott added.

The post Wesfarmers (ASX:WES) share price higher after receiving API takeover boost appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro 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 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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