Australia’s Sigma jumps after offering to address regulatory concerns with Chemist Warehouse merger

(Reuters) -Australia’s Sigma Healthcare jumped 13% on Tuesday after it offered a court-enforceable undertaking to address the antitrust regulator’s concerns about its proposed merger with Chemist Warehouse to form an A$8.8 billion ($6.09 billion) company.

Shares of Sigma soared as much as 12.9% as of 0041 GMT, their highest level since April 2007, and were the best performers on the benchmark index, which was down 0.5%.

The Australian Competition and Consumer Commission (ACCC), in its preliminary findings published in June, said the deal could leave pharmacies outside the merged group facing rising costs, which would lead them to be less competitive.

The regulator had said it was worried that the merged group would have access to the commercially sensitive data of Sigma’s existing pharmacy customers.

Under the proposed undertaking, Sigma would restrict the collection and use of confidential data from its wholesale customers and franchisees for three years, and also allow franchisees to terminate their agreements, the competition regulator said.

The ACCC said it was seeking feedback from stakeholders on whether the draft undertaking offered by Sigma might be capable of addressing the competition concerns.

Chemist Warehouse is a privately owned pharmacy and retail chain in Australia known for cheap prices and large stores, while Sigma is a wholesaler and distributor of prescription medicines and other products.

The proposed deal, announced in December, would see Sigma acquiring Chemist Warehouse in exchange for a stake in the company and A$700 million in cash, allowing Chemist Warehouse to be effectively backdoor listed through Sigma.

Acknowledging the ACCC’s decision to start a consultation process, Sigma said it would work co-operatively with the regulator.

To facilitate consultation, the proposed date for the ACCC’s decision on the merger has been extended to Nov. 7 from Oct. 24.

($1 = 1.4455 Australian dollars)

(Reporting by Himanshi Akhand in Bengaluru; Editing by Subhranshu Sahu and Alan Barona)