Chemist Warehouse to back door list into Sigma

Sigma entered a trading halt on Wednesday as it raises about $350m through Goldman Sachs, as part of plans for a back door listing of the $3bn Chemist Warehouse.

It comes after the pharmacy wholesaler this year won a lucrative Chemist Warehouse contract from rival EBOS.

Chemist Warehouse had previously been working on a potential float with advisory firm Rothschild & Co, but after former UBS investment banker-turned real estate company boss David Di Pilla bought in, some speculated that Chemist Warehouse and Sigma could become close, given Mr Di Pilla’s strong ties to the Chemist Warehouse founders.

It was after his investment that Sigma won a key Chemist Warehouse this year.

The structure of the deal is set to be announced by Sigma imminently.

The $350m being raised by Sigma is to provide working capital, while some say that the money may be needed to provide enough free float, should Chemist Warehouse take scrip in the business that may equal about 90 per cent.

There needs to be at least a 20 per cent free float needed under the ASX listing rules and 30 per cent for S&P index inclusion.

Sigma said on Wednesday it was in a trading halt “pending a material transaction”.

Mr Di Pilla is the managing director of HMC Capital, formerly known as Home Consortium, and he amassed a stake of more than 19 per cent in Sigma more than a year.

He formed the company after buying the sites of the former Masters home improvement chain that were owned by Woolworths.

At that time, the sites were purchased for more than a collective $700m with a consortium that included his former UBS Australia boss Matthew Grounds (now the Barrenjoey group boss), Spotlight Group and Chemist Warehouse.

Also working with Mr Di Pilla has been star equity capital markets operative Robbie Vanderzeil, who has worked at UBS and Jarden.

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

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

DataRoom reported in March that a tie-up between Sigma and Chemist Warehouse was one scenario that has been discussed.

The Australian reported in June that Sigma Healthcare had reached a $2bn pharmaceutical drugs deal with Chemist Warehouse.

The deal provided a 10.7 per cent stake in Sigma to Chemist Warehouse that bound the wholesaler and retailer.

Under the deal, Chemist Warehouse had the right to purchase certain non-core assets from Sigma, which have a value of $24.5m.

Sigma had already supplied consumer goods to Chemist Warehouse to the value of around $1bn a year, and the new drugs deal was to result in its revenue generated by the nation’s largest pharmacy chain rising to $3bn a year.

The Australian reported in October that Chemist Warehouse, which is controlled by founders Jack Gance and Mario Verrocchi, made a net profit of $302m for the year to June, down 22 per cent from the $385m it made a year earlier.

Revenue reached $3.09bn, compared to $2.99bn in 2022.

A $250m increase in cost of sales on the CW Group Holdings balance sheet was the main reason for the difference in net profit.

Market sources on Wednesday anticipated that the $350m was step one for a deal that could take some time to eventuate, with regulatory approvals potentially needed to occur that could take months, such as the Australian Competition and Consumer Commission.