Wesfarmers, the Australian conglomerate, has unexpectedly abandoned its plans to support the Infinity Pharmacy Group, the largest franchisee in its Priceline pharmacy network. Instead of proceeding with a planned equity injection, Wesfarmers shocked creditors by placing more than 50 stores into receivership, leaving lenders facing losses exceeding $400 million.
The decision, finalized in December 2023, was part of a strategy dubbed Project Coral. This initiative aimed to restructure Infinity’s debt and establish a new management framework. According to sources familiar with the situation, Wesfarmers had been on the verge of finalizing an agreement that involved significant financial support. The move to receivership not only impacts creditors but also creates considerable uncertainty for employees and the broader Priceline network.
Wesfarmers has been working to transform its health division, established in 2022, into a profitable counterpart to its well-known retail chains, Kmart and Bunnings. The company’s foray into the health sector began with the acquisition of Australian Pharmaceutical Industries, which includes the Priceline chain and a drug wholesaling operation. However, the endeavor has proven more challenging than anticipated, particularly against the backdrop of fierce competition from discount pharmacy chains like Chemist Warehouse.
Infinity, which operates a network of 91 stores, has faced mounting financial pressures, leading to unpaid bills and substantial debts. Secured lenders are owed over $400 million, including $110 million to Australian Pharmaceutical Industries. The financial turmoil forced Wesfarmers to push 54 of Infinity’s stores into receivership, thereby triggering the voluntary administration of the remaining locations.
The decision to place Infinity into receivership surprised key creditors such as Westpac, National Australia Bank, and Commonwealth Bank, who collectively are owed approximately $145 million. Other stakeholders, including ASX-listed Paragon Care and medical lender Medpro, were also caught off guard by Wesfarmers’ abrupt action.
Reports indicate that Wesfarmers acted to prevent Infinity from being sold to rival Chempro, which had previously shown interest in acquiring most of the network. Chempro’s indicative offer valued Infinity at around $570 million, inclusive of debt, and would have allowed for full repayment of creditors. However, the acquisition would have compromised Wesfarmers’ critical wholesaling contract and weakened the Priceline brand.
In an email to employees, Richard Pearson, chief customer officer of Wesfarmers Health, expressed regret over the decision to appoint KPMG as receivers and Teneo as voluntary administrators. He noted that Infinity’s inability to meet financial obligations over an extended period had created an untenable situation.
Infinity operates under several brands, including Infinity Pharmacy and Chemist Discount Centre. The pharmacy group is governed by a board of nine directors, many of whom manage multiple locations. Paragon, owed $47 million, reportedly demanded repayment by December 31, 2023, threatening to initiate administration proceedings if not settled.
A first creditors’ meeting took place on December 31, with KPMG and Teneo collaborating to facilitate the sale of Infinity’s entire network of pharmacies. Multiple interested parties, including Chempro and Sigma Healthcare, have emerged as potential buyers in this unfolding situation.
The events surrounding Wesfarmers and the Priceline network highlight the complexities of managing large-scale health operations within a competitive retail landscape, as the future of Infinity Pharmacy Group hangs in the balance.
