Sigma offers concessions to get $8.8b Chemist Warehouse deal over the line

Sigma Healthcare has offered concessions to get its $8.8 billion proposed mega-merger with privately held Chemist Warehouse over the line.

The competition regulator in June raised a raft of red flags over the proposed deal, including concerns that the merger would raise barriers to rivals hoping to enter the pharmacy market or extend their footprint.

To alleviate those concerns, Sigma on Tuesday revealed it offered a court-enforceable undertaking that would allow franchisees who joined the pharmacy retailer’s network before January 1 to terminate their agreements without penalties, for a period of three years.

It would also place restrictions on the collection, use and disclosure of confidential data from Sigma wholesale customers and franchisees, as well as remain a participating pharmaceutical wholesaler under the Commonwealth Government’s Community Service Obligation arrangements for at least five years.

The Australian Competition and Consumer Commission is now seeking feedback on the plans offered by Sigma.

As a result, the regulator has pushed back the scheduled date for an announcement on the deal with Chemist Warehouse from October 24 to November 7 to allow for consultations.

“We are now seeking feedback from stakeholders on whether the draft undertaking offered by Sigma may be capable of addressing the competition concerns arising from its proposed acquisition of Chemist Warehouse,” ACCC chair Gina Cass-Gottlieb said.

“While the ACCC is publicly consulting on this undertaking, this should not be interpreted to mean that this or any other form of undertaking will ultimately be accepted by the ACCC.”

In a brief statement to the market, Sigma said it continued to work co-operatively with the regulator and welcomed its public consultation process.

Ord Minnett senior research analyst Tom Godfrey said it viewed the undertakings proposed by Sigma as “sensible”.

Chemist Warehouse’s annual report — released along with Sigma’s half-year results last week — showed profit before tax hit $574 million in 2024, up 33.7 per cent on the prior corresponding period.

It opened 19 new Australian stores in 2024, and another 16 internationally, taking the total to 637.

For the six months to the end of July, Sigma reported profit of $13.7m, up 303.6 per cent, on revenue of $1.84 billion, up 17.3 per cent.