Sigma shares rocket over cleared merger with Chemist Warehouse
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More news: Sigma Healthcare shares have rocketed following news the competition regulator cleared its reverse merger with Chemist Warehouse.
Its shares soared 32% to $2.58 in early trading after the announcement.
What they said: Chemist Warehouse chief executive Mario Verrocchi said: “We believe that the combined group will continue to drive competition within the industry. By bringing together Sigma’s advanced distribution and logistics capabilities with Chemist Warehouse’s strengths in retail and marketing, we are creating an opportunity that will benefit both companies’ shareholders and customers.
“The proposed merger sets the stage for a new chapter of growth for both Chemist Warehouse and Sigma, aimed at delivering greater value to our customers, employees, franchisees, and shareholders,” he said.
ACCC clears Sigma-Chemist Warehouse merger
The news: The competition regulator has cleared the $8.8 billion merger between pharmacy wholesaler Sigma Healthcare and retail chain Chemist Warehouse.
The context: The deal is subject to court enforceable undertakings offered by Sigma in response to initial competition concerns from the Australian Competition and Consumer Commission (ACCC).
These concerns included the potential harm to pharmacies currently supplied by ASX-listed Sigma and the potential for Chemist Warehouse to access these pharmacies' data in ways that damage competition.
Sigma’s undertakings require the wholesaler:
- Not to prevent or hinder franchisees who entered into their franchising arrangements prior to 1 January 2024 from terminating their franchise agreements with Sigma for a period of three years;
- To not place restrictions on the collection, use and disclosure of confidential data and information from Sigma wholesale customers and franchisees for a period of three years:
- Remain a participating pharmaceutical wholesaler under the Commonwealth Government's Community Service Obligation arrangements for at least five years, which means meeting certain service standards and compliance requirements for wholesaling of prescription medicines to all pharmacies.
The companies are now working to complete the transaction under an extended timetable.
What they said: ACCC chair Gina Cass-Gottlieb said that with proposed undertakings, the merger is unlikely to substantially lessen competition “at all levels of the pharmacy supply chain”.
“There are numerous pharmacy retailers that will continue to provide meaningful and ongoing competition to Chemist Warehouse and Sigma’s banner pharmacies as well as non-pharmacy retailers that sell front-of-store products and some over-the-counter products. The leading supermarkets are key providers of such products and will continue to provide strong competition," Cass-Gottlieb said.
Sigma chief executive and managing director Vikesh Ramsunder said: "the ACCC decision marks a critical milestone for the proposed transaction and provides us with the conviction to progress with the next steps in the process".
"The proposed transaction has the potential to create a leading ASX-listed healthcare company through the combination of the complementary strengths of Sigma's state-of-the-art pharmaceutical distribution infrastructure with Chemist Warehouse Group's retailing know how," Ramsunder said.
The sources: ACCC , ASX announcement
