Chemist Warehouse to merge with pharmaceutical giant Sigma Healthcare

Chemist Warehouse will merge with Sigma Healthcare in an $8.8bn move that will create a pharmaceutical giant.

Chemist Warehouse will merge with Sigma Healthcare in an $8.8bn move that will create a pharmaceutical giant. Picture: NewsWire / Sarah Marshall

Chemist Warehouse will merge with pharmacy giant Sigma Healthcare to create a pharmacy and healthcare giant.

In doing so, Sigma will acquire Chemist Warehouse, creating a publicly listed company on the ASX with a market capitalisation of about $8.8bn.

Sigma Healthcare Limited, a major Australia-based pharmaceutical wholesaler and pharmacy franchisors, made the announcement on Monday morning, announcing its intentions to acquire the Chemist Warehouse Group (CWG).

If successful, CWG founders Jack Gance and Mario Verrocchi will join the board, and WG shareholders will also own 85.75 per cent of the new merged group, plus $700m in cash consideration.

The Chemist Warehouse Group will be acquired by Sigma Healthcare Group. NewsWire/ Sarah Marshall

Sigma shareholder will retain the remaining 14.25 per cent of the merged entity.

In documents released to the ASX, Sigma Healthcare said the proposed merger would create a “full-service wholesaler, distributor and retail pharmacy franchisor”.

Sigma will also raise $400m in funds, managed by Goldman Sachs, to increase the working capital needed to implement to new supply contract with Chemist Warehouse.

In order for the deal to proceed, the Australian Consumer and Competition Commission (ACCC) and New Zealand’s Overseas Investment Office will need to approve the merger. Shareholders from both groups will also vote to approve the deal, however CWG’s biggest shareholder, HMC Capital has indicated it will vote in favour of the merger.

In a meeting with investors held on Monday morning, Sigma chairman Michael Sammells said the proposed merger would push both companies into a “transformational and compelling” direction.

“This is a rare opportunity to combine the core competencies of two strong healthcare businesses,” he said.

Asked specifically about whether he anticipated difficulties with getting ACCC approvals, Mr Sammells said he “respected” the watchdog’s process an would “work cooperatively” with them.

“We’ve already committed an early engagement and we will work closely with them to meet their needs through the course of the transaction,” he said.

The merger would create a new ASX-listed entity with a market capitalisation of about $8.8bn. Picture: NCA NewsWire/ Naomi Jellicoe

CWG chairman Jack Grace said the deal was a “unique opportunity” for both shareholders which would combine “CWG’s retailing and marketing capabilities and Sigma’s state-of-the-art distribution infrastructure and logistics capabilities”.

“We look forward to building the next chapter of CWG’s success for the benefit of our customers, staff, franchisees and shareholders,” he said.

Originally published as Chemist Warehouse to merge with pharmaceutical giant Sigma Healthcare