Wesfarmers has unexpectedly scrapped plans to assist the largest franchisee in its Priceline pharmacy network, leading to the abrupt receivership of Infinity Pharmacy Group. This move leaves creditors facing debts exceeding $400 million. The decision marks a significant setback for Wesfarmers, which had aimed to bolster its health division through a project dubbed Project Coral.
The Perth-based conglomerate was reportedly close to executing an equity injection into Infinity, which would have included restructuring its debt and establishing a new management entity. Insiders familiar with the negotiations, who requested anonymity, indicated that the plan was intended to stabilize the largest segment of the Priceline business. Instead, in December 2023, more than 50 Infinity stores were placed into receivership, creating widespread uncertainty for employees, creditors, and the broader Priceline network.
Wesfarmers launched into the health sector in 2022 by acquiring Australian Pharmaceutical Industries, which encompasses the Priceline chain and a drug wholesaling operation. While financial returns have shown improvement, the transition has proven more complicated than anticipated. The company is now contending with fierce competition from Chemist Warehouse, a discount pharmacy chain that has merged with Sigma Healthcare and currently operates on the Australian Securities Exchange (ASX).
Stabilizing Infinity was pivotal for Wesfarmers’ strategy to revitalize Australian Pharmaceutical Industries. The deal, which had been under negotiation for several months, included a non-binding term sheet approved by Rob Scott, Wesfarmers’ chief executive, and Anthony Gianotti, the chief financial officer. However, mounting financial pressures led Infinity to default on its obligations, with secured lenders now owed over $400 million and Australian Pharmaceutical Industries owed an additional $110 million.
The decision to put 54 of Infinity’s stores into receivership triggered the remaining 37 stores to enter voluntary administration. Major lenders, including Westpac, National Australia Bank, and Commonwealth Bank, are collectively owed around $145 million. This unexpected move to protect Wesfarmers’ interests took many creditors, including Paragon Care and medical lender Medpro, by surprise.
According to sources familiar with the situation, Wesfarmers acted to prevent Infinity from being sold to rival Chempro, which had previously expressed interest in acquiring most of the network. Chempro’s indicative offer valued Infinity at around $570 million, including debt, and would have ensured creditor repayment but would have jeopardized Wesfarmers’ wholesaling contract and weakened the Priceline brand.
Wesfarmers declined to comment further on the situation. Richard Pearson, chief customer officer of Wesfarmers Health, expressed regret in an email to employees regarding the appointment of KPMG as receivers and Teneo as voluntary administrators. He noted, “Infinity’s failure to meet their financial obligations over a prolonged period, as well as their worsening debt position, has placed them in an untenable position.”
Infinity operates under various brands, including Infinity Pharmacy and Chemist Discount Centre, and has a board comprising nine directors, some of whom own multiple locations. Reports indicate that Paragon, owed $47 million, demanded repayment by December 31, 2023, and threatened to appoint administrators. Wesfarmers’ preemptive action to maintain control followed this demand.
A creditors’ meeting was convened on December 31, 2023, to discuss the situation. KPMG and Teneo are collaborating to sell the entire network of 91 pharmacies, attracting interest from several parties, including Chempro and Sigma Healthcare. The outcome of these proceedings will be closely watched as stakeholders navigate the fallout from Wesfarmers’ sudden shift in strategy.
