Chemist Warehouse owner Sigma weighing convertible bond raising

Sigma’s Vikesh Ramsunder and Chemist Warehouse’s Sam Gance, Jack Gance and Mario Verrocchi ring the bell at the ASX for the formal listing. Picture: John Feder

Chemist Warehouse owner Sigma is weighing up a convertible bond raising in a move that analysts believe could be aimed at paying back some of its bank debt.

The Australian listed pharmaceuticals company has a market value more than six times the size at $33bn after it merged with the largest retail pharmacy chain in Australia, Chemist Warehouse.

The deal was finalised this year.

Sigma sources say that the group is considering the move as part of its broader capital management strategy, but nothing had yet been decided.

Convertible bonds are typically priced at a 25 to 30 per cent premium to a company’s recently traded share price, say market experts.

Yet getting a convertible bond raising away could be a tough ask for any party in the current volatile market.

A raise of about $1bn may not be out of the question, but some believe a move to secure a few hundred million dollars would be an easier assignment at a time when jittery investors remain cautious due to global market volatility.

Another factor to sell to the market would be that shares for existing investors would be diluted.

Any deal would likely happen through Sigma’s house investment bank Goldman Sachs.

Sigma’s shares trade at a strong premium with the potential upside from $60m in synergies created by bringing the two companies together after four years.

Given its size, passive index funds now need to buy into the stock, also adding support.

While it is not short of debt, a convertible bond raising deal could see Sigma secure cash to fund growth at more affordable funding prices.

It told the market in its accounts that in February it had terminated its existing bank debt facilities of up to $500m that were due to mature next year and entered into a new secured syndicated facility worth $1.5bn maturing in 2028.

The group’s balance sheet remains in strong shape with no debt at the end of the 2025 financial year and a $14.6m cash position.

Sigma is prospering from the new Chemist Warehouse supply contract that is now in house after previously being outsourced to EBOS.

It said the elevated cash balance at the beginning of the year reflected the proceeds from the $400m equity raising undertaken last year.

Chemist Warehouse founders Jack Gance and Mario Verrocchi and their families now own 49 per cent of Sigma shares following the retail giant’s back door listing into pharmacy wholesaler and retailer Sigma this year.

While a wholesaler, Sigma is also the company behind pharmacy brands such as Amcal, Guardian, PharmaSave, Discount Drug Stores and now Chemist Warehouse, adding 630-plus stores.

With 880 stores, it creates the largest retail network of franchised pharmacies and strongly positions itself to consolidate the fragmented pharmacy industry here and overseas even further.

It would be aided by its newly combined financial firepower to open more stores in Australia and around the world.

The two groups now have a combined annual turnover of $6.6bn, earnings before interest and tax of $605m and net profit of $522m.

Chemist Warehouse started in 2000 through a store in Footscray, Melbourne before the brand was launched in 2003 with an aggressive franchise-driven growth strategy taking store numbers to 100 by 2008.

The company was an early mover in the China market, establishing a partnership with Alibaba’s TMall Global in 2015 and moved into New Zealand in 2017, where it has 50 stores and Dubai last year.

While Sigma has plans to grow, cost control remains a focus.