Chemist Warehouse, Sigma Healthcare merge in $5bn deal

MELBOURNE – Chemist Warehouse Group (CWG) and Sigma Healthcare have announced a transformative merger agreement that will result in the creation of an $8.8 billion entity, marking one of Australia’s most significant healthcare sector consolidations. The deal, which includes a substantial $700 million cash component, will position the combined organization within the top 100 Australian companies and ensure its inclusion in the ASX200 index.

The merger, set to redefine the pharmacy landscape, will see CWG founders Jack Gance and Mario Verrocchi assume board positions while retaining majority ownership in the new public entity. Vikesh Ramsunder is slated to continue his leadership role as managing director. The founders’ shares are subject to escrow conditions, with non-escrowed shareholders holding nearly 37% of the company.

Under the terms of the agreement, Chemist Warehouse will secure an 85.75% stake in Sigma Healthcare through a mix of cash and share issuance of about $5bn. This move effectively enables a backdoor listing for CWG’s expansive pharmacy network, which boasts around 600 stores primarily located in Melbourne where the business was founded over 50 years ago.

The strategic alignment is poised to bring about significant benefits for both entities. Michael Sammells from Sigma anticipates improved operational efficiencies and expanded growth opportunities. Meanwhile, CWG chairman Jack Gance envisions enhanced retail prowess and marketing capabilities along with access to Sigma’s advanced distribution network.

To support the merger and its associated activities, a capital raise of $400 million is being pursued for working capital purposes. The transaction also anticipates generating annual cost synergies estimated at $60 million.

The deal’s completion remains subject to approval from the Australian Competition and Consumer Commission (ACCC), which is currently reviewing CWG’s proposed acquisition stake. As both companies await regulatory consent, this landmark merger stands to reshape the Australian pharmaceutical retail sector significantly.

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