Chemist Warehouse will merge with pharmacy giant Sigma Healthcare to create a pharmacy and healthcare behemoth valued at ~A$8.8 billion.
This landmark deal, one of the largest in recent years, will propel the merged entity into the ranks of the top 200 listed companies on the Australian Securities Exchange (ASX).
Sigma Healthcare has announced plans to raise A$400 million as part of the merger process, with underwriting support from Goldman Sachs (NYSE:GS). The deal, which awaits approval from competition regulators, will integrate Sigma's wholesaler and franchise pharmacy operations with Chemist Warehouse's extensive network of 600 stores.
Post-merger, Chemist Warehouse shareholders, including co-founders and billionaires Jack Gance and Mario Verrocchi, will hold a commanding 85.75% stake in the merged entity and will receive a A$700 million payout.
“Unprecedented opportunity for both sets of shareholders”
This merger is a notable event in a year marked by sparse and modest listings on the ASX. Founded in 1972 in Melbourne, Chemist Warehouse has grown significantly, expanding into New Zealand, China, and Ireland. Its network sales, including franchised stores in Australia and company-owned stores overseas, reached A$7.9 billion last year.
Interestingly, Chemist Warehouse generates around 70% of its sales from non-pharmacy items, compared to the average community pharmacy's 27%.
"The combination of CWG's retailing and marketing capabilities with Sigma's advanced distribution and logistics infrastructure presents an unprecedented opportunity for both sets of shareholders," stated Gance, Chemist Warehouse’s chairman.
A$60 million in annual cost savings
The merger, anticipated to be completed in the second half of next year, is subject to regulatory approvals, including from the Australian Competition and Consumer Commission. If approved, the merged entity will operate a network of 16 distribution centres across Australia and New Zealand, and Sigma expects to achieve A$60 million in annual cost savings.
Sigma has secured a A$1 billion debt facility from ANZ and National Australia Bank to finance the transaction and refinance existing Chemist Warehouse debt. The leadership of the combined group will include Sigma chairman Michael Sammells as the independent chairman, with Sigma CEO Vikesh Ramsunder overseeing the enlarged group.