Opportunity knocks for Wesfarmers in M&AIt gets shown almost...

Opportunity knocks for Wesfarmers in M&A

It gets shown almost every deal in every sector of the market, but Wesfarmers is not only highly selective when it comes to acquisitions, it is highly secretive as well.

Still, after buying Priceline owner Australian Pharmaceutical Industries in 2021 for $776m, the Perth-based conglomerate could soon be ready for its next big deal.

And many in the market continue to bet that it’s like to be in the area of financial services.

Kmart is travelling well, so it could be a good time to sell that business.

But Wesfarmers’ retail operations are very integrated when it comes to online retailing, and it’s talking about international expansion with Kmart’s Anko brand.

Wesfarmers has considered moving into financial services before and saw big benefits when it used to be the owner of supermarket chain Coles.

It previously owned an insurance business, sold to Arthur J. Gallagher and Co in 2014, and its CEO Rob Scott was previously managing director of Wesfarmers insurance.

One obvious candidate would be a health insurer, which would create cross-selling opportunities across its other retail businesses such as Officeworks, Target, Kmart, Bunnings and Priceline.

Fitting nicely into its portfolio could be a health insurer like the $3.9bn listed NIB.

The understanding is Wesfarmers has talked to such groups over the years, although there’s no suggestion a deal is afoot.

Still, it’s worth looking overseas as to the merits of such a tie up. In 2018, CVS Health purchased health insurer Aetna for $US69bn.

At the time, it justified the move saying that by integrating Aetna’s medical information and analytics with CVS Health’s pharmacy data, CVS “can develop new ways to engage consumers in their total health and wellness through personal contacts and deeper collaboration with their primary care physicians”.

Wesfarmers made no specific comments about M&A activity during its results presentation, except some high level commentary on the analyst call, saying that the company’s balance sheet was strong when it came to potential opportunities.

Jarden’s Ben Gilbert released a note in November discussing the “untapped ecosystem opportunity in Australia” when it came to healthcare. He said Jarden saw Woolworths, Wesfarmers Medibank Private and NIB as best placed to benefit from a platform created from data to deliver positive customer outcomes. However, he said in Australia, the key impediment was regulation.