Sigma’s $5.9 billion merger with Australia’s Chemist Warehouse raises regulatory concerns

By Thomson Reuters Jun 12, 2024 | 7:38 PM

By Scott Murdoch and Roushni Nair

SYDNEY (Reuters) -Australia’s competition regulator on Thursday flagged major concerns with Sigma Healthcare’s proposed merger with retailer Chemist Warehouse Group to form a A$8.8 billion ($5.9 billion) company.

The Australian Competition and Consumer Commission (ACCC) said in a statement the proposed integration across the wholesale and retail level would limit competition in a number of markets, jeopardising competition in the nation’s pharmaceutical sector.

Sigma shares dropped nearly 11% in early trade on Thursday to the lowest point since Feb. 21, according to LSEG data.

Sigma said in December it would merge with privately owned pharmacy giant Chemist Warehouse Group.

The proposed deal has 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.

Chemist Warehouse will own 85.8% of the merged entity that will supply 1,000 Sigma-aligned pharmacies and own 600 Chemist Warehouse outlets.

The regulator said the deal could leave pharmacies outside of the merged group facing rising costs, which would lead them to be less competitive.

($1 = 1.5013 Australian dollars)

(Reporting by Scott Murdoch in Sydney and Roushni Nair in Bengaluru; Editing by Alan Barona and Jamie Freed)