EBOS held talks about Chemist Warehouse merger: sources

Chemist Warehouse is moving to become an even more powerful pharmacy player through its back door listing into Sigma. Picture: Sarah Marshall, NewsWire

EBOS is understood to have held talks with Chemist Warehouse about embarking on a similar mergers and acquisitions-style deal to what is on the table with Sigma, say sources, before the retail giant pulled its business from the $6bn Australia and New Zealand listed pharmacy wholesaler.

Now EBOS rival Sigma is expected to emerge from a trading halt on Monday with details of a planned backdoor listing of Chemist Warehouse into its company structure in a multi-billion dollar transaction which will be transformational.

EBOS, run by John Cullity, won the Chemist Warehouse business from Sigma in 2018, in what was a crushing blow for Sigma at the time, causing its share price to fall 40 per cent.

But, in June Sigma announced it had won the business back, a development anticipated to be on the cards after the business interests of well-connected former investment banker David Di Pilla, HMC Capital, bought into the business in 2022.

Mr Di Pilla’s stake is now 19 per cent, nominating former Cochlear boss Chris Roberts to the board as a director last month.

Chemist Warehouse provided EBOS with $1.1bn annually — 17 per cent of its overall revenue.

Mr Di Pilla is understood to have close connections to the Chemist Warehouse founders and owners, Jack Gance and Mario Verrocchi.

Sources say with a market value of $730m, Sigma would be more attractive for a back door listing of Chemist Warehouse than the $6bn EBOS. Plus, since winning back the contract, its production facilities have been “gold plated”.

Sigma’s also more purely exposed to pharmacy, with EBOS also owning pet care operations, including Black Hawk Petfood and a half share of New Zealand retail chain Animates, as well as its pharmacy wholesale operations.

Yet earlier, there were some sources which suggested EBOS had the Chemist Warehouse deal in the bag, then lost it.

EBOS counts Macquarie Capital as its adviser, which has also stayed close to Chemist Warehouse in the event it opted to embark on a listing.

EBOS has been in search of a big deal since the Chemist Warehouse contract loss to fill the gap in its earnings.

It weighed an acquisition of the $4bn-odd Greencross business, owned by TPG Capital in recent weeks, but pulled the deal after concerns about support for an equity raising to fund the acquisition.

DataRoom understands Mr Di Pilla’s right hand man and former UBS colleague Robbie Vanderziel is nutting out the transaction, putting his equities expertise to use, alongside Chemist Warehouse adviser Rothschild & Co.

Sigma, which is raising $350m to create some more liquidity for the deal, is being advised by Goldman Sachs.

A float of international retailer Chemist Warehouse, which has $3bn of annual sales and 500 stores in Australia, has been speculated for years, but it was only when Mr Di Pilla bought into Sigma it started looking more apparent a back door listing could be on the agenda.

Wesfarmers had also considered buying Chemist Warehouse in the past.

Most in the market on Thursday were saying they believed the deal had a long way to play out, with the Australian Competition and Consumer Commission and The Pharmacy Guild of Australia both expected to have strong views.

As part of the transaction, Jack Gance and Mario Verrocchi will join the board of Sigma, as will Mr Di Pilla.

Sigma is an ASX-listed pharmaceutical wholesaler and distributor and also has a network of independent and franchise pharmacies and healthcare providers across Australia.

Its brands include Amcal, Guardian, Discount Drug Stores and PharmaSave.