Lessons in chemistry
The ACCC has raised a number of preliminary concerns about Chemist Warehouse’s $8 billion reverse merger into Sigma Healthcare. But dealmakers involved insist they were bracing for worse.
It always felt inevitable that Chemist Warehouse’s reverse merger into Sigma Healthcare — an innovative $8 billion deal that wrongfooted many in the market — would eventually hit a speedbump.
And so it was on Thursday when the ACCC raised a whole slate of preliminary concerns over the transaction, including that it may weaken competition and lead to higher prices for consumers.
The market reaction to the news was swift and, to those who have followed it closely, surprising: Sigma shares sank 4% (having traded nearly 10% lower) to their lowest levels in three months. Some observers were quick to predict that the ACCC’s intervention could even spell the end of the road for the deal. “We don’t think Sigma will overcome the ACCC’s concerns,” Morningstar analysts wrote.
But the football teams of lawyers and dealmakers on both sides of the deal (Sigma is being advised by Goldman Sachs and Gilbert + Tobin, while Chemist Warehouse has Rothschilds and Herbert Smith Freehills in its corner) insist they were actually bracing for worse.
