The Australian Competition and Consumer Commission (ACCC) has approved the merger between Sigma Healthcare and Chemist Warehouse, a deal valued at A$8.8 billion.
This merger will result in the combined entity owning some 16% of Australian pharmacies, or around 700 locations.
ACCC chair Gina Cass-Gottlieb said the merger was unlikely to substantially reduce competition, especially considering a court-enforceable undertaking from Sigma.
This undertaking will prevent Sigma from obstructing pharmacies wishing to exit the group and requires the deletion of their data.
“There is and will continue to be effective competition at all levels of the pharmacy supply chain, capable of constraining a combined Sigma Chemist Warehouse,” Cass-Gottlieb said.
She emphasised that rival pharmacies and non-pharmacy retailers would maintain their competitive presence.
Despite initial concerns regarding potential competition reduction at retail and wholesale levels, and opposition from the Pharmacy Guild, Cass-Gottlieb confirmed that the merger had undergone thorough scrutiny, including an in-depth analysis of Sigma and Chemist Warehouse’s internal documents.
Sigma’s undertaking allows pharmacies to exit their agreements without facing costly fees or restrictions, which will help sustain competition from alternative wholesalers. Cass-Gottlieb highlighted the role of competitors like Australian Pharmaceutical (TADAWUL:2070) Industries (ASX:API) in maintaining market balance.
A pivotal milestone
Sigma chief executive Vikesh Ramsunder welcomed the ACCC's decision, calling it a pivotal milestone.
He expressed confidence that the merger would create a leading ASX-listed healthcare company by leveraging Sigma's distribution strengths alongside Chemist Warehouse’s retail expertise.
“We believe the proposed merger will create a stronger business and accelerate our long-term growth ambitions for the benefit of our stakeholders,” he said.
Sigma’s shares surged on the ASX following the announcement and are now trading more than 21% higher.