Australia’s Sigma hits 18-year high with Chemist Warehouse merger concessions

Authors: Himanshi Akhand and Roushni Nair

(Reuters) – Sigma Healthcare shares hit an 18-year high on Tuesday after the Australian healthcare group offered three big concessions to facilitate its A$8.8 billion ($6.09 billion) merger with Chemist Warehouse. .

Under the proposed concessions, Sigma will allow franchisees who joined the network in early 2024 to opt out of their contracts without penalty for the next three years, the Australian Competition and Consumer Commission (ACCC) said in a statement.

Additionally, Sigma offered to limit how the company uses confidential information from wholesale customers and franchisees for the next three years.

The company also undertakes to remain a participating pharmaceutical wholesaler under the Commonwealth Government’s Community Service Commitment Scheme for a minimum of five years, ensuring it meets specified service standards and compliance requirements.

The ACCC has postponed its decision on the Sigma-Chemist Warehouse deal from October 24 to November 7 to allow for further consultations on the license, it said.

Sigma shares rose 18.06% as of 03:46 GMT to their highest level since mid-February 2007. The company’s shares were the best performer in the benchmark index, which fell 0.8%.

“We note that the ACCC may amend/extend this list of commitments, but we are positive that the process is being conducted in a constructive manner and that the decision deadline has not been significantly extended” – Tom​​​​ Godfrey, senior research analyst at Ord Minnet, he said in the note.

The ACCC said it was seeking views from interested parties on whether the draft undertaking proposed by Sigma could address competition concerns.

Chemist Warehouse is a privately held chain of pharmacies and stores known for its low prices and large stores, while Sigma is a wholesaler and distributor of prescription drugs and other products.

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

While acknowledging the ACCC’s decision to launch a consultation process, Sigma said it would engage with the regulator.

($1 = 1.4445 Australian dollars)

(Reporting by Himanshi Akhand and Roushni Nair in Bengaluru; Editing by Subhranshu Sahu, Alan Barona and Varun HK)