-------------------------------------------------------------------------------- Merger rumours despite denials Michael West 01dec05
TAKEOVER speculation in the healthcare sector intensified yesterday despite an emphatic denial by Australian Pharmaceutical Industries that it was in talks with grocery giant Woolworths.
Shares in all three key pharmaceutical distributors - API, Sigma and Symbion - hit fresh highs following a report in The Australian about secret talks between Woolies' chief executive Roger Corbett and API chief executive Jeff Sher. The report was rebutted by API. Woolworths again offered no comment.
"API is not, and has not been in any discussions with Woolworths or its related parties regarding a takeover, merger, or formal alliance between the two companies," API said in a statement yesterday.
Despite the denial, API closed 19c firmer at $3.23. Contributing to the speculation was a pervasive view that all the pharmaceutical players were both hunting and being hunted. API was sensitive to the concerns of its suppliers who feared severe margin pressure were Woolworths to swallow it.
Woolworths has made no secret of its intentions. Chief executive Roger Corbett has been looking at ways to break into the pharmacy market for six years and expressed regret at the Government's decision to keep chemists protected, at the Woolies AGM last Friday.
"Having been locked out of the pharmacy market by Tony Abbott (federal Health Minister), it's still a long-term growth opportunity for us," Woolworths spokeswoman said yesterday. She was referring to the decision last month to extend the Pharmacy Guild agreement which protects pharmacists for another four years.
One research analyst told The Australian yesterday that if Woolworths didn't pounce on API, another distributor would surely be in the sights of the supermarket chain.
"It's a low-margin, low-volume business that makes perfect sense (for Woolworths to acquire)," he said.
API rival Sigma has been busy bedding down its merger with Arrow Pharmaceuticals. And Symbion is settling new management.
