Chemist Warehouse and Sigma Healthcare kick off trading as $34bn merged entity
Chemist Warehouse co-founder Mario Verrocchi has urged franchisees to ‘stick around’ for five more years under the newly-minted merged firm.
The combined Sigma Healthcare/Chemist Warehouse group is only 40 years into a 100-year journey, Chemist Warehouse chief executive and co-founder Mario Verrocchi has told shareholders at the company’s $32bn relisting on the ASX.
“There’s still plenty to do,” he told a crowded room of more than 140 people, many of them veteran Chemist Warehouse staff and franchisees, after the ringing the bell ceremony for the combined company which is now about the 22nd-largest on the ASX by value.
The 14-month journey to merge the two companies came to fruition on Thursday morning, creating a $32bn company which is vertically integrated across pharmaceuticals wholesale, distribution and consumer retail.
Slightly more than 170 million shares changed hands on Thursday, worth $492.8m
Mr Verrocchi said the success of Chemist Warehouse, which he co-founded with Jack Gance in 2000, was due to a “never give up attitude” and a belief that anything was possible.
“You can work away for 40 years with minimal results and then, on the 41st or 44th year, you become the biggest thing in the country,” he said.
“The power of the grind and that never give up attitude is real. We are on a 100-year journey, and we are about 40 years into it.”
Mr Verrocchi will run all three pharmacy chains under the combined group, including Chemist Warehouse, Amcal, and Discount Drug Stores.
The new company will retain the name Sigma Healthcare, and have a combined turnover of $6.6bn, earnings before interest and tax of $605m and net profit of $522m.
It will be headed by incumbent Sigma chief executive, Vikesh Ramsunder.
ASX: SIG Shares up
The company’s senior management and newly merged board will now be able to meet for the first time, having been legally constrained from getting together and talking strategy until now.
Mr Verrocchi joked that the last 14 months had been like agreeing to get married to someone but not being able to ask them where they lived or how much money they had in the bank.
“We couldn’t ask anything,” he said.
But he said it was now time for the two groups to “open up the suitcase” and start talking about the logistics of the merger.
He said he felt it would take five years to reap the benefits of the merger with Sigma.
“It’s going to take five years for the warehouses to be amalgamated, you have people to move around, you have rationalisation at every single level of the business,’’ he said.
“I’ve chained myself to my desk for the next five years.”
The deal will bring together some of the strongest brands in the sector in Australia including Chemist Warehouse, My Chemist, Amcal, and Discount Drug.
The bulk of these are the 658 Chemist Warehouse stores, most of which are in Australia.
Mr Verrocchi also signalled a continued aggressive growth strategy for the group, which could see another 500 stores open in Australia.
He compared the potential of Chemist Warehouse to that of supermarket giants Coles and Woolworths which have some 900 to 1000 outlets around the country.
“There is definitely organic growth in Australia and the opportunity to expand the range of products and wider distribution,” he said.
He said there were opportunities in the combined group to expand its existing brands as well as efficiencies to be had by combining the two groups.
Pharmacy expansion plans
Mr Verrocchi said the expanded stores in Australia would be a mix of all three group brands-depending on the location and market.
He said there was a chance that some of Chemist Warehouse’s almost 300 franchisees could use the listing to sell down their shares, particularly to pay down debt, but urged them to “stick around”.
“They have all worked very hard and whatever rewards they get, they get,” he said.
“If they sell down their shares to pay off debt, I would be very happy.
“My personal view is stick around boys. We’ve got another five years to go, and I think we can do a really good job.”
He said there was also potential for the group, which has 50 stores in New Zealand, and others in China, Ireland and Dubai, to expand further offshore.
“The world’s about opportunities,” he said. “Success is at the intersection of opportunity and being ready.”
“We’re always ready, so if an opportunity comes, we’ll take it and see where it takes us.”
Investors on standby
On the stock front, Chemist Warehouse shareholders own 85.7 per cent of the merged company with the rest held by Sigma shareholders.
Chemist Warehouse co-founder, Jack Gance, his brother Sam, and Mario Verrocchi will have a combined shareholding of 48 per cent of the newly listed company, the bulk of which cannot be sold until August 2026.
Market attention will be on how much of the 37 per cent of other shares are sold by existing Chemist Warehouse shareholders in coming days and weeks.
Meanwhile, David Di Pilla’s HMC Capital Group, which had owned more than five per cent of Sigma, announced on Wednesday that it had sold down some of its stake at prices of between $2.77 and $2.84 a share.
Investment banker Di Pilla was a key player in orchestrating the deal between the privately owned Chemist Warehouse and Sigma.
The deal followed Sigma’s earlier failed attempts to take over the API pharmacy group, the owners of Priceline pharmacies, in 2021, which was bought by Wesfarmers.
Some analysts have argued that the Sigma/ Chemist Warehouse deal leaves the company already fully priced, and it will need to boost its dividend payout if it is to attract significant interest from new retail shareholders.
Chemist Warehouse co-founder Jack Gance will be a director of the combined company along with Mr Verrocchi and Mr Gance’s nephew, Damien Gance, the son of Jack’s younger brother Sam and Ms Danielle Di Pilla.
Damien Gance, a pharmacist, has been Chemist Warehouse’s long-time commercial director.
Originally published as Chemist Warehouse and Sigma Healthcare kick off trading as $34bn merged entity
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