WES – UBS rates the stock as Neutral

Wesfarmers has increased its bid for Australian Pharmaceutical Industries ((API)) by 12% to $1.55, representing a 37% premium to the one-month average and also allowing for up to 5c to be paid in a dividend to API shareholders.

Washington H. Soul Pattinson ((SOL)), which owns 19.3% of API, has accepted and been given Wesfarmers a call option over its shares. The API board has approved the offer, which is now subject to shareholder approval.

While awaiting the outcome of that vote before adjusting forecasts, the broker considers the acquisition as another sound investment in a growth industry, which will also be profit-accretive. Neutral and $62 target retained.

Sector: Food & Staples Retailing.


Target price is $62.00.Current Price is $57.12. Difference: $4.88 – (brackets indicate current price is over target). If WES meets the UBS target it will return approximately 8% (excluding dividends, fees and charges – negative figures indicate an expected loss).



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