The Wesfarmers Ltd (ASX: WES) share price rose by 2% today as it seemed that it’s in prime position to take over Australian Pharmaceutical Industries Ltd (ASX: API).
What happened today?
The other contender for API has been Sigma Healthcare Ltd (ASX: SIG). However, Sigma announced today that it will not proceed with its current proposal.
Sigma’s board still thinks that a merger with API is a very strong proposal, particularly due to the $45 million of operational synergies per year that it thinks would have been created.
However, after further assessment, and in context of the competitive bid process with its “changing transaction and economic considerations”, Sigma decided not to go ahead with the proposal.
What does this mean for Sigma?
The Sigma Chair Ray Gunston had the following to say:
“Sigma remains confident of our growth prospects without a merger with API and the board and management have continued to focus on longer term growth in our core operations. The Sigma team will keep on working to finalise the completion of our infrastructure upgrade, including our ERP project, and to remain focused on leveraging our infrastructure to create shareholder value.
“Notwithstanding some short-term challenges in the current year, we believe the Sigma business base provides a positive longer-term outlook. Sigma’s investments in its operations, and its strong balance sheet and future cash generation, underpin the strategic directions that will be shaped under the leadership of our new CEO Vikesh Ramsunder from February 2022.”
Positives for the Wesfarmers share price
It’s good that Wesfarmers isn’t going to be drawn into a bidding battle for API, as long as no other competing bids emerge.
Wesfarmers says that it plans 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.
The company also said that API will 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.
I think Wesfarmers is one of the best ASX blue chips around, so it’s worthwhile thinking about for steady long-term growth and attractive dividends. But there may be even better ASX dividend shares out there to consider.
