API banks on own “growth engines” after Sigma merger taken off the table

Australian Pharmaceutical Industries (API) is in no rush to sell its Sigma shares despite the rejection of a proposed merger earlier this month.

Last year, API bought a 12.85 per cent stake in Sigma, but now that a merger is off the table API has been rethinking its options.

“At the moment share price is below what we bought those shares for, so we’ll just sit for a minute and we’ll review our options as to when we sell,” API CEO and managing director Richard Vincent told Inside Retail.

“The good thing is that the dividends that we’re getting from Sigma are offsetting the cost of the finance to buy those shares. So I’m in no hurry to clear those shares,” he added.

Sigma rejected the proposed $727 million merger with API in early March saying it had undervalued Sigma’s long-term prospects.

Vincent said that while it is “disappointing” that the merger will not go ahead, API already has various “growth engines” in the business including Priceline Pharmacy, ClearSkincare clinics and its consumer brands business in New Zealand.

“We’re still rolling out Priceline stores all over Australia… and all these new products and brands, all that will bring growth,” he said.

The acquisition of ClearSkincare clinics last year is another promising venture for the pharmaceutical giant.

“We bought that business [ClearSkincare] with 40 clinics. It’s small today but it’s going to be big. We want to bring that product range into Priceline so we can get that exposure for the clinic side of the business, so that’s going to grow. And it’s complementary because it’s the same customer that’s in Priceline,” he said.

Vincent said the next objective is growing the chain of clinics into a large national brand, similar to how Priceline has grown.

“We’ve got the experience in building those locations, finding the right locations and finding people to go in and run those locations. It was growing steadily and gradually and now we can supercharge it,” he said.

API plans to leverage the data from the eight million women in its Sister Club loyalty program to advertise ClearSkincare to those customers it thinks will be interested in its services.

“The Sigma thing would have been great but we already have a growth strategy based on these three elements,” Vincent added.

clearskincare

ClearSkincare Clinics founder Dr Philippa McCaffery said the expansion will allow her team to reach millennials who have struggled to get the right treatment for acne.

“Even if we doubled or tripled the size of our clinic network – which I think is very probable – if you look at how many Priceline pharmacies there are in Australia, it’s double or triple that again,” McCaffery said.

“It’s all about making sure the people with the problem get the right treatment.”

Priceline to trial click and collect 

Commenting on a click-and-collect trial expected to kick off in Priceline Pharmacy later this year, Vincent said the motivation goes back to discovering what the customer wants.

“We just want to be able to provide the options that the customer wants. At the end of the day I don’t care whether our shoppers buy online or come into our store, what’s important is we keep them in the Priceline community.”

Vincent is hopeful that the click and collect service will provide opportunities for further purchases in-store.

“Once they’re in the store it’s the team’s job to make sure that they have a good experience in the store and hopefully add something to their basket.”

New products and services for Priceline

The health and beauty retailer announced a host of new and exclusive products to hit stores in the coming months.

“We have a whole array of new brands launching… 19 new brands in the next six months. Hundreds of new products. And we’re also looking at services, what we can do there to expand our service offerings,” Tamalin Morton general manager of Priceline Pharmacy said.

Priceline recently introduced express beauty services in-store including make up applications and skincare consultations. The pharmacy is also continuing to strengthen its health service offerings.

“We’re about both health and beauty – I think that’s a real point of difference for Priceline,” Morton added.

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