Sigma Healthcare cops first strike as it awaits ACCC call on Chemist Warehouse merger

Sigma Healthcare has copped a first strike on its remuneration report as it awaits approval from the competition regulator for its $8.8 billion proposed merger with private retailer Chemist Warehouse.

Sigma shareholders delivered a near 48 per cent vote against its pay report at the company’s annual general meeting on Thursday.

Boards receive strikes when a motion has more than 25 per cent of shareholders vote against it.

Sigma is working through the proposed deal, announced back in December, that will see it merge with Chemist Warehouse to create a publicly-listed company on the Australian Securities Exchange via a back-door listing.

The Australian Consumer and Competition Commission has undertaken its market enquiries phase, with findings or a final decision set to be announced on June 13.

In his address to the meeting on Thursday, chair Michael Sammells said he was hopeful of a positive decision in the second half of the calendar year, which would be followed by a shareholder approval process expected to take about three months.

“Clearly the proposed merger with Chemist Warehouse, which is subject to ACCC approval, provides the biggest transformational opportunity in the long and proud history of Sigma,” he said.

But in the event it does not proceed, he said retention of key skills, expertise and corporate knowledge would be critical in driving a standalone Sigma to continue to diversify the business, grow its margins, and identify and execute alternative strategic transactions.

“If the merger is not approved, Sigma remains a more attractive standalone investment thesis than it was prior to the completion of our two-year turnaround,” Mr Sammells said

Sigma has previously forecast synergies of $60 million a year after the first four years of the combined group.

The first look under the Chemist Warehouse hood was included in Sigma’s full-year results in March, which revealed the private retailer’s statutory profit before tax lifted 28.6 per cent to $321m in the six months to the end of December.

Chemist Warehouse has more than 600 bricks-and-mortar stores in Australia, including 37 in WA.

The retailer — which also operates in New Zealand, Ireland and China — generates about 70 per cent of revenue from “front-of-store” sales including cosmetics, vitamins and other non-prescription items.

This compared to about 27 per cent of revenue generated from these items at rival retailers.

Sigma shares were up 0.4 per cent to $1.24 just before the market’s close on Thursday.