Wesfarmers might need to be ready for some competition…
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The Wesfarmers Ltd (ASX: WES) share price is inching higher today despite reports there could be some competition over its takeover target, Australian Pharmaceutical Industries Ltd (ASX: API) – operator of the Priceline chain of stores.
Shares in the diversified conglomerate are currently trading hands for $58.62, up 0.57%.
The latest development concerning the takeover of Australian Pharmaceutical Industries follows Wesfarmers’ $687 million non-binding indicative offer yesterday. The announcement sent API shares 20% higher.
Enter possible challenger
As reported by The Australian this morning, there are rumours that Wesfarmers may be in for a tussle over Priceline before all is said and done. The publication believes that resigning Sigma Healthcare Ltd (ASX: SIG) CEO Mr Mark Hopper had been approached by API regarding a possible merger, merely weeks prior.
However, it is thought that Sigma palmed off the proposal as it hunkers down while implementing an update across its IT systems. On top of that, Sigma is still contesting with finding a replacement for Mr Hopper.
While Sigma may not have been interested in the synergistic move earlier, Wesfarmers’ move might have changed the game. Given the size and success of Wesfarmers’ past investments, Sigma might now be forced to consider the cost of not shacking up with its Priceline operating rival.
Despite the rumours, the Wesfarmers share price is in the green today. At this stage, there’s no official word from Sigma on how it intends to react.
Merger and acquisition frenzy
Wesfarmers is not the only company that has been driving share prices higher with takeover bids lately. The last few months have seen an acceleration in the number of mergers and acquisitions.
To summarise a handful of recent offers, we have IFM Investors’ shot at Sydney Airport Holdings Pty Ltd (ASX: SYD), Galaxy Resources and Orocobre’s proposed merger, and Soul Patts merger with Milton. And those are just a few in the last month…
According to Refinitiv, global M&A transactions for the first four months of the year were up 124% to $1.77 trillion. In short, analysts put this down to plenty of excess cash and low-interest rates.
Wesfarmers share price snapshot
The Wesfarmers share price has been a solid performer since rebounding from the COVID-19 crash. In the past year, the conglomerate’s shares have experienced a rally of almost 28%. Investors would be pleased to know that is an S&P/ASX 200 Index (ASX: XJO) outperformance of around 5% excluding dividends.
At the time of writing, the company holds a market capitalisation of $66.5 billion.
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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 Washington H. Soul Pattinson and Company Limited and Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.