It’s highly unlikely that many Wesfarmers Ltd (ASX: WES) shareholders would lose sleep at night over the company’s balance sheet.
The 107-year-old blue-chip business has maintained a decent stash of cash for many years. In addition, the amount of debt carried by the Australian conglomerate has been trending downwards since 2016.
However, with a potential bidding war looming with Woolworths Group Ltd (ASX: WOW) for Australian Pharmaceutical Industries Ltd (ASX: API), now might be a good time to get familiar with the company’s available cash.
How much cash does ASX-listed Wesfarmers have?
There are many factors that influence the trajectory of a company’s share price over the long term. One variable of the equation can be the condition of a company’s balance sheet.
Ideally, there is enough spare cash sitting on the sidelines to protect the business from black swan events. However, another important use of spare capital is for providing increased shareholder returns. Sometimes this simply means dividends, while other times it can be strategic acquisitions.
In the case of Wesfarmers, the ASX-listed diversified business reported a total of $3.023 billion of cash and cash equivalents at 30 June 2021. These sidelined dollars have come in handy recently, with Wesfarmers throwing down a $763 million offer for pharmacy chain operator API.
Though, now Woolworths has entered the race with a bigger bid of $873 million. In turn, pundits are expecting that a bidding war might ensue. So, which company is better equipped financially? It turns out that Wesfarmers has about $2 billion more cash than Woolworths as of 30 June 2021.
What else could the cash go towards?
As my Foolish colleague Tristan covered last month, Wesfarmers is looking to increase the digitisation of Bunnings. Specifically, the company plans to grow its e-commerce operations, invest in new systems, and install a new analytics platform.
Additionally, Wesfarmers has been built on opportunistic mergers and acquisitions over the years. Thanks to a diligent management team, the company has grown to a market capitalisation of over $60 billion. If shareholders are going to continue to be rewarded with growth, the company could put this excess cash towards future appealing acquisitions.
Finally, the S&P/ASX 200 Index (ASX: XJO) has been no match for Wesfarmers on the ASX in 2021. The company’s share price has risen by 16.2%, compared to the benchmark’s 10%.
The post How much cash does Wesfarmers (ASX:WES) have and where might it be looking to deploy it? appeared first on The Motley Fool Australia.
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More reading
- RBA maintains interest rate but removes 2024 reference. What could this mean for ASX shares?
- What do Wesfarmers (ASX:WES) and Amazon.com have in common?
- Could this be a fly in the ointment for Woolworths’ (ASX:WOW) push into healthcare?
- Can Wesfarmers (ASX:WES) win the battle to take over API?
- ASX 200 (ASX:XJO) midday update: Afterpay sinks, Woolworths bids for API
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 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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