Retail giant Wesfarmers has publicly stated it had no alternative but to force Australia's biggest Priceline pharmacy franchisee into receivership, pointing the finger at a reckless, debt-funded acquisition strategy that left the business unable to pay its suppliers.
The Collapse of Infinity Pharmacy
Breaking its silence on the issue, the Western Australian conglomerate has moved to counter what it calls inaccurate media reports about its role in the downfall of Infinity Pharmacy Group. After prolonged negotiations aimed at recapitalising the struggling franchisee, Wesfarmers took decisive action in December, appointing receivers from KPMG to take control of 56 of the group's 92 stores, most of which traded under the Priceline banner. The remaining Infinity pharmacies were subsequently placed into administration by their own directors.
In a communication to other franchisees, Richard Pearson, Chief Customer Officer of Wesfarmers' health division, laid the blame squarely on Infinity's management. He attributed the failure to "an aggressive acquisition of new pharmacies, funded via expensive, high-interest rate debt."
"This expansion came at the expense of Infinity meeting its financial obligations, including not paying us and various other creditors, to supply products," Mr Pearson stated.
Creditors Owed $400 Million as Buyers Sought
The fallout from the collapse is significant, with KPMG and advisory firm Teneo now tasked with finding new owners for the Infinity stores. This process is crucial to recoup some of the $400 million owed to a long list of creditors.
Wesfarmers entered the pharmacy sector through its 2022 acquisition of Australian Pharmaceutical Industries (API), the former ASX-listed owner of the Priceline chain. This purchase formed the cornerstone of a new health division for the conglomerate, which is better known for powerhouse retail brands like Bunnings and Kmart.
Wesfarmers Defends Its Actions
Mr Pearson emphasised that the stores under receivership and administration have been "running well with stock on the shelves, team members being paid and importantly, customers receiving a high level of service" since the changeover nearly a month ago.
He stressed that the decision to call in KPMG was a last resort, following years of support from API in an attempt to steer Infinity onto a sustainable path. "Our support was through provision of stock, and we have not directly invested in Infinity," he clarified.
This support, he explained, was intended to keep essential community pharmacy services operating while a long-term financial solution was found. However, Wesfarmers' patience ran out when it discovered that even as Infinity's finances worsened, management was still seeking to acquire more pharmacies with additional debt while continuing to withhold payments.
"Therefore, after extensive engagement with Infinity management and creditors and detailed financial due diligence, we had no option but to draw a line in the sand," Mr Pearson said.
He concluded that the receivership process was ultimately in the best interests of the community pharmacies involved, as it would "support the ongoing delivery of reliable and quality health outcomes for customers over the long term."
