This appeared last week:
Chemist Warehouse merges with Sigma Healthcare to form $32 billion ASX giant
by Finance News Network February 14, 2025 10:08 AM
Chemist Warehouse and Sigma Healthcare have officially merged, creating a $32 billion pharmacy giant that debuted on the Australian Securities Exchange (ASX) on 13 February 2025. The merger establishes one of the country’s largest pharmacy networks, with Chemist Warehouse becoming a wholly owned subsidiary of Sigma Healthcare.
Chemist Warehouse co-founders Jack Gance, Sam Gance, and Mario Verrocchi were present at the ASX for the market debut, ringing the opening bell to mark the occasion. Addressing the crowd, Verrocchi described the listing as a milestone achieved through decades of perseverance.
“After 50 years of toil, 50 years of grind, a bit of blood, sweat, and tears, we’ve established ourselves as the leaders of this industry,” Verrocchi said.
Chemist Warehouse, founded in 1972, has built its success on high-volume, low-cost retail sales, offering competitive pricing on a wide range of skincare, beauty, vitamin, and over-the-counter products.
The company also operates MyChemist, Ultra Beauty, My Beauty Spot, and Optometrist Warehouse, expanding its presence beyond traditional pharmacies.
Leadership Structure Post-Merger
In the merged entity, Sigma Healthcare’s CEO and Managing Director, Vikesh Ramsunder, will continue in his role, overseeing the combined operations. Mario Verrocchi, co-founder and CEO of Chemist Warehouse, will manage the retail pharmacy chains under the merged group, including Chemist Warehouse, Amcal, and Discount Drug Stores. Additionally, Chemist Warehouse co-founders Jack Gance and Mario Verrocchi have been appointed to the board of the merged company, contributing their extensive industry experience to the strategic direction of the new entity.
A Dominant Force in the Pharmacy Sector
The newly merged entity brings together Chemist Warehouse’s nearly 600 stores with Sigma’s network of 340 Amcal and Discount Drug Stores outlets, creating a business that now controls 16 percent of Australia’s pharmacies.
Under the deal, Chemist Warehouse shareholders own 85.75 percent of the merged company, while Sigma shareholders hold 14.25 percent. The three Chemist Warehouse co-founders now collectively hold approximately $15 billion in shares, which are locked in escrow until at least August 2025.
The company’s first day of trading saw Sigma’s stock rise 5.4 percent to close at $2.91, reflecting strong investor enthusiasm for the pharmacy giant’s market debut.
Expansion Plans and Future Growth
Verrocchi has outlined an ambitious plan for growth, with the merged business aiming to add at least 400 more stores over the next five years. He also likened the merger to a marriage, stating that discussions on rebranding Sigma’s pharmacy brands under the Chemist Warehouse banner were still in the early stages.
“We’re saying it’s like we’re getting married. But we can’t ask, ‘Where do you live, how much money do you have in the bank?’ We can’t ask anything. So we’ll open up the suitcase tomorrow,” he said.
Industry Concerns and Regulatory Scrutiny
The merger has raised concerns within the pharmacy sector, particularly from the Pharmacy Guild of Australia, which fears reduced competition and potential price increases for consumers.
“Such consolidation has led to non-competitive duopolies and an unequal distribution of healthcare services, ultimately reducing the presence of smaller, local businesses,” the Guild said in a statement.
Despite these concerns, the Australian Competition and Consumer Commission approved the deal, paving the way for the creation of one of the largest pharmacy groups in the country.
A Long-Term Vision for Industry Leadership
With its ASX listing complete, the company is positioning itself as a vertically integrated retail and pharmaceutical giant, taking inspiration from UK health and beauty retailer Boots.
“For the next five years, I’ve chained myself to my desk,” Verrocchi said, reaffirming his commitment to leading the company’s growth strategy.
Here is the link:
https://www.finnewsnetwork.com.au/archives/finance_news_network932088.html
Only one question. How is this not a monopoly creating merger?
The ACCC thinks it is all OK:
Sigma and Chemist Warehouse proposed merger not opposed, subject to undertaking
Date
7 November 2024
Topics
The ACCC will not oppose the Sigma Healthcare Limited (ASX: SIG) and CW Group Holdings Limited (Chemist Warehouse) merger after accepting a court-enforceable undertaking from Sigma.
Sigma is a pharmacy wholesaler of prescription medicines, over the counter and front of store products. Sigma is also a franchisor of pharmacies under banners including ‘Amcal +’ and ‘Discount Drug Store’.
Chemist Warehouse is a pharmacy franchisor and distributor to its own pharmacies and retail stores under the brands ‘Chemist Warehouse’, ‘MyChemist’, ‘Ultra Beauty’, ‘My Beauty Spot’ and ‘Optometrist Warehouse’.
“The ACCC found that, with the undertaking, the proposed merger is unlikely to substantially lessen competition. 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,” ACCC Chair Gina Cass-Gottlieb said.
“The ACCC’s analysis found that the proposed merger is unlikely to substantially lessen competition nationally or locally because other pharmacies and non-pharmacy retailers will continue to compete to the same extent they compete now.”
“Consumers value different aspects of Sigma’s and Chemist Warehouse’s banner pharmacies’ offerings. Importantly, consumers will continue to have choice between smaller format stores offering personalised services to consumers and the Chemist Warehouse offering, focussed on larger format discount stores and front-of-store offerings,” Ms Cass-Gottlieb said.
For reasons including changes to the pharmacy regulatory environment, the ACCC also found that a combined Sigma Chemist Warehouse is unlikely able to influence Sigma banner pharmacies to the same extent Chemist Warehouse influences its current franchisees. Sigma franchisees are expected to continue to make their own individual commercial decisions.
“Critical to our conclusion that a substantial lessening of competition is unlikely is the competitive constraint provided by competing wholesalers including API, EBOS, and CH2,” Ms Cass-Gottlieb said.
EBOS and API are large national wholesalers supplying full product lines, and CH2 is a smaller wholesaler that supplies both community pharmacies and the hospital sector. Each of these wholesalers has agreements with the Commonwealth Government to distribute PBS medicines as well as spare capacity to supply new retail pharmacy customers.
The ACCC’s investigation found that these wholesalers have actively competed for new pharmacy customers and retail pharmacies have switched between wholesalers. The undertaking given by Sigma will ensure that pharmacies currently engaged in longer term contracts with Sigma will also be able to readily switch wholesalers should they choose to do so, strengthening the competitive constraint of these alternative wholesale supply options.
The ACCC therefore formed the view that a combined Sigma Chemist Warehouse will be unable to foreclose downstream pharmacies that compete with Chemist Warehouse franchisees.
“We also gave careful focus to the question of overall competition in pharmacy retailing and concluded that the transaction is unlikely to result in a substantial lessening of competition in any market,” Ms Cass-Gottlieb said.
“There are numerous pharmacy retailers that will continue to provide meaningful and ongoing competition to Chemist Warehouse and Sigma’s banner pharmacies as well as non-pharmacy retailers that sell front-of-store products and some over-the-counter products. The leading supermarkets are key providers of such products and will continue to provide strong competition.”
For prescription medicines, pricing will also continue to be regulated by the Australian Government’s Pharmaceutical Benefits Scheme.
As part of its review, the ACCC also considered whether the acquisition would impact the supply of pharmacy retail products, including generic medicines.
The ACCC found that there were multiple channels available to suppliers and manufacturers of these products to reach consumers, including through alternative wholesalers and direct to pharmacy arrangements. For products other than PBS medicines, non-pharmacy retailers were also key alternatives.
“We received many submissions from pharmacists and other market participants expressing concerns about this transaction,” Ms Cass-Gottlieb said.
“We reviewed the transaction very closely to test these concerns and conducted detailed analysis of Chemist Warehouse and Sigma’s internal documents.”
“The evidence gathered, augmented by the undertaking given by Sigma, led us to conclude that a substantial lessening of competition is unlikely,” Ms Cass-Gottlieb said.
Evidence shows that retail pharmacies do not face significant barriers to switching and pharmacy customers do switch wholesalers, although concerns remained for pharmacy customers in longer term wholesale and/or franchise agreements with Sigma.
“To help ensure those pharmacies in longer term contracts are able to switch easily to a new wholesaler or banner group, we accepted an undertaking that requires Sigma not to enforce contractual restrictions on exit and ensures payments under contracts do not make it costly for a pharmacy to switch,” Ms Cass-Gottlieb said.
The enforceable undertaking also requires Sigma to safeguard and delete the data of those pharmacies that choose to switch and to require the merged Sigma Chemist Warehouse to continue as a pharmaceutical wholesaler under the Commonwealth Government’s Community Service Obligation (CSO) arrangements for five years.
“The ability of pharmacies to readily exit their existing agreements with Sigma will maintain and enhance the ability of alternative wholesalers to constrain the merged entity,” Ms Cass-Gottlieb said.
More information, including the undertaking can be found on the ACCC’s public register here: Sigma Healthcare - Chemist Warehouse Group
Notes to editors
In considering the proposed merger, the ACCC applies the legal test set out in section 50 of the Competition and Consumer Act.
In general terms, section 50 prohibits acquisitions that would have the effect, or be likely to have the effect, of substantially lessening competition in any market.
Here is the link (with lots of details):
I guess we watch and wait and see!
David.
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