The ACCC, in a preliminary finding, said the proposed reverse takeover of Sigma Healthcare would be “a major structural change for the pharmacy sector”.
Chemist Warehouse may have to sell off part of its store network to convince the competition regulator that plans to merge with Sigma Healthcare in an $8.8 billion backdoor listing would not lessen competition and lead to higher prices.
Deal maker: Sigma’s largest shareholder, HMC’s David Di Pilla - and a cousin of Chemist Warehouse’s Mario Verrocchi - and ACCC chairwoman Gina Cass-Gottlieb.In a statement outlining its preliminary views, the regulator said the deal may “substantially lessen competition in pharmacy retailing” and “may lead to increased prices for the goods and services provided in pharmacies”.
The merger, announced in December, would bring Chemist Warehouse onto the ASX through Sigma. It would operate 864 outlets under the Chemist Warehouse, MyChemist, Amcal and Discount Drug Stores brands, as well as a large wholesale business. Sigma would buy Chemist Warehouse in return for its own shares and $700 million in cash.
Martin Hickson, a portfolio manager at 1851 Capital, said he too was not surprised by the ACCC’s statement of issues given the size of the transaction, but that it would proceed. He said pricing was only one consideration, noting that pharmacies provide a range of services with smaller chemists playing an important role in community services.
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