Backdoor listing of Chemist Warehouse into Sigma on track

The ACCC is due to announce its findings on the Chemist Warehouse-Sigma proposal on October 24. Picture: NCA NewsWire / Gaye Gerard

Deal makers working on the backdoor listing of Chemist Warehouse into Sigma are believed to be confident that they can get a transaction past the competition watchdog without any major adjustments.

That’s the chatter in the market.

The Australian Competition and Consumer Commission is due to announce the findings on October 24. While there had been expectation that a major reworking of the merger could be on the cards, that’s not understood to be the case, with the deal teams taking the view they can convince the ACCC a transaction would not have a major impact with respect to reducing competition in the form that the transaction is in.

Earlier, when releasing its statement of issues surrounding its position on the backdoor listing of Chemist Warehouse into Sigma, the ACCC said it had strong concerns about the tie-up between the pharmacy retailer with wholesaler and retailer Sigma surrounding the “major structural change for the pharmacy sector”, the possibility of weakening competition in pharmacy product supply and access, and use of commercially sensitive data relating to pharmacies supplied by Sigma in a way that damages competition.

The ACCC said obtaining data could be used to target pharmacies that rival Chemist Warehouse or pre-empt and undermine them.

The backdoor listing was announced late last year.

Pricing in the wholesale space for pharmaceuticals is regulated, where the industry makes a profit of about 1 per cent on prescription pharmacy drug sales in the low-margin business.

As part of the announced deal last year, Chemist Warehouse shareholders would hold 85.75 per cent of a merged entity with Sigma, a pharmacy retailer (operating under the Amcal brand) and wholesaler, that would be worth $8.8bn.

The merger valued Chemist Warehouse at about 13.6 times earnings before interest, tax, depreciation and amortisation and would create a company with at least 600 stores.