‘50 years of toil, 50 years of grind’: Chemist Warehouse is now a $32 billion giant

“Patience and time, the two biggest warriors needed to achieve success – and boy, we’ve been patient,” Chemist Warehouse chief executive and co-founder Mario Verrocchi declared as the pharmacy chain made a stellar landing on the Australian stock exchange on Thursday.

A crowd of franchisees, advisers, family and friends erupted into cheers at the bell-ringing ceremony shortly after 10am as one of the nation’s most successful retailers joined forces with pharmaceutical distributor Sigma Healthcare to create a $32 billion titan that could reconfigure the industry.

Cheers at the bell-ringing ceremony. Left to right: Sigma Healthcare CEO Vikesh Ramsunder; Chemist Warehouse co-founders Sam Gance and Jack Gance; Chemist Warehouse CEO Mario Verrocchi. Credit: Louie Douvis

In a speech full of references to “the power of the mind” and the “never give-up attitude”, Verrocchi said the entry onto the sharemarket came after decades of pushing on “when it’s hard, slow, and without a visible end”.

“After 50 years of toil, 50 years of grind, a bit of blood and sweat and tears, we’ve established ourselves as the leaders of this industry,” Verrocchi told the room. “The suppliers know it, the customers definitely know it, and the rest of the world are just about to find out.”

Chemist Warehouse co-founder and CEO Mario Verrocchi.Credit: Louie Douvis

More than 100 millionaires have been created from the merger, with their stakes worth between $5 million and $25 million, according to analysis from proxy advisory firm Ownership Matters. The trio of founders is now worth at least $2.5 billion each, with Verrocchi’s fortune sitting around $4.4 billion.

The company’s share price closed 5.4 per cent higher at $2.91. It was up 8.3 per cent in afternoon trading at $2.99.

The merger of Chemist Warehouse – which has nearly 600 outlets – with the smaller ASX-listed Sigma, a pharmaceutical wholesaler, distributor and franchisor that supports and operates 340 pharmacies under its Amcal and Discount Drug Stores brands, forms an industry giant that controls 16 per cent, or 950, of the nation’s pharmacies. Chemist Warehouse also operates the MyChemist, Ultra Beauty, My Beauty Spot and Optometrist Warehouse brands.

The merger had sparked concerns about reduced competition from other industry players and from the competition watchdog, although it eventually waved the deal through.

Verrocchi on Thursday referred to the tie-up as a marriage union, telling reporters that he, Sigma chief executive Vikesh Ramsunder and their respective companies had thus far been restricted by the ACCC from discussing growth plans in detail.

Some of Sigma’s banner brands may potentially rebrand as Chemist Warehouse, but it was too soon to tell, Verrocchi added.

“We’re saying it’s like we’re getting married. But we can’t ask, ‘Where do you live, how much money you got in the bank?’ We can’t ask anything. So we’ll open up the suitcase tomorrow,” he said.

The merged business plans to add at least 400 more stores and is only 40 years into its “100-year journey” to becoming a vertically integrated giant like UK health and beauty retailer Boots. “[For] the next five years, I’ve chained myself to my desk,” Verrocchi said.

Chemist Warehouse was founded by brothers Jack and Sam Gance, who studied pharmacy in university and bought their first pharmacy in 1972. Verrocchi began as an intern in 1980 before ascending through the ranks to lead the business. The two families own 49 per cent of the combined business.

A key part of the pharmacy chain’s success is the volume of front-of-house sales, or its wide range of skincare, beauty, vitamin and other over-the-counter products offered at competitive prices. Another is the unique franchise structure involving friends and relatives, described by Swinburne Law School senior lecturer and corporate governance expert Helen Bird as a “family and friends business model”, that allows the business to sidestep laws that limit how many pharmacies a person can own.

Chemist Warehouse’s shareholders will own 85.75 per cent of the newly merged entity, while Sigma shareholders will hold 14.25 per cent. The Gance brothers and Verrocchi will now hold $15 billion worth of shares held in escrow, restricting them from selling until late August this year.

A crowd of franchisees, advisors, family and friends and employees cheered at the bell-ringing ceremony on Thursday.Credit: Louie Douvis

In his speech, Verrocchi read out a definition of the Gen Z slang word “sigma” after hearing his grandchildren use and explain the term, which refers to something or someone very popular and successful without seeking praise.

“Basically, you’re like an alpha type, but the sigma people do it without the hype,” he said. “Let’s work in silence and let our success be our noise, and let this whole industry be screaming: ‘What the sigma?’”

While Chemist Warehouse’s presence on the sharemarket doesn’t constitute a float as it is a backdoor listing through Sigma, its entry to the ASX has been highly anticipated and the merged entity is now the index’s 22nd biggest company by market capitalisation.

Its successful debut goes some way to turning around the narrative of a shrinking ASX as takeovers from foreign players and keen interest from private equity giants has seen several companies delist from the bourse across the last two years.

The Pharmacy Guild, which represents community pharmacies, has been a vocal critic of the merger, arguing that it would reduce wholesaling choices and lessen competition, leading to higher prices and lower service standards.

“Many unanswered questions remain,” the Guild said in a statement following the ACCC’s decision to give the deal the green light.

“Such consolidation has led to non-competitive duopolies and an unequal distribution of healthcare services, ultimately reducing the presence of smaller, local businesses that are better positioned to offer personalised care to their communities, which the Guild believes is not in the best interests of patients.”

This masthead first revealed in December 2023 that Chemist Warehouse was in talks to merge with Sigma.

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