Will Wesfarmers’ planned acquistion come with a legal battle on the side?
The post Wesfarmers (ASX:WES) share price not hampered by news of class action appeared first on The Motley Fool Australia. –
The Wesfarmers Ltd (ASX: WES) share price ended the week strong despite its latest acquisition target reportedly facing a class action.
The Wesfarmers share price finished the week trading for $59.01 – 1.7% higher than where it started.
The gains follow a surprise acquisition offer posted from the ASX giant to Australian Pharmaceutical Industries Ltd.
Wesfarmers offered to buy all shares in the owner of Priceline for $1.38 apiece – a 21% premium on the Australian Pharmaceutical Industries share price’s last close.
Unfortunately, Australian Pharmaceutical Industries was back in the headlines yesterday, as more than 30 Priceline Pharmacy franchisees are reportedly advancing their class action against the company.
Let’s take a closer look.
Priceline class action
The Australian Financial Review (AFR) reported yesterday a class action against Australian Pharmaceutical Industries is expected to be lodged in the Victorian Supreme Court next month.
News of the class action has been swirling since late last year.
The Wesfarmers share price hasn’t been noticeably affected by the recent reporting.
Australian Pharmaceutical Industries owns all Priceline stores but Priceline Pharmacy stores operate under a franchise model.
According to ClassPR, the class action claims the Priceline Pharmacy franchise agreement breaches Victorian, New South Wales, and Queensland legislation. It also claims the agreement limits pharmacies’ profitability.
ClassPR is a public relations company working closely with Levitt Robinson Solicitors. Levitt Robinson Solicitors is the law firm acting on behalf of current and former Priceline Pharmacy franchisees.
The franchisees are claiming Australian Pharmaceutical Industries dictate what franchisees can stock, from whom they can order products, how they arrange their stores, and how they price saleable items.
Additionally, the AFR reported that Australian Pharmaceutical Industries charges franchisees 6% of the value of over-the-counter sales. It also charges franchisees 3% of all sales in which a customer uses the Priceline rewards system.
According to AFR, an Australian Pharmaceutical Industries spokesperson stated the company isn’t concerned about the class action.
Wesfarmers share price snapshot
2021 has been a good year so far for the Wesfarmers share price.
It has currently gained 14.6% year to date. It is also 26.8% higher than it was this time last year.
The company has a market capitalisation of around $66.4 billion, with approximately 1.1 billion shares outstanding.
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Motley Fool contributor Brooke Cooper 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.