Sigma confirms $8.8b merger with Chemist Warehouse, will raise equity

The news: Sigma Healthcare has agreed to its anticipated merger with Chemist Warehouse to create the largest pharmacy retailer listed on the ASX.

The numbers: Sigma on Monday said the combined company will have a market capitalisation of $8.8 billion and will be effected by Sigma acquiring Chemist Warehouse in return for Sigma shares and a cash consideration of $700 million. Sigma shareholders will hold 14.25% of the merged company, with Chemist Warehouse shareholders keeping the balance.

The context: The merger, which will bring together Sigma’s wholesaler pharmacy business, as well as its Amcal and Guardian retail pharmacy brands, with Chemist Warehouse’s 600 store network, will be subject to approval from the Australian Competition and Consumer Commission. Sigma told investors it would raise $400 million via an entitlement offer as part of the merger. The merger is expected to unlock significant efficiencies, with cost synergies estimated at $60 million per annum.