ACCC Flags Major Concerns Over Sigma-Chemist Warehouse $5.9 Billion Merger

Australia’s competition regulator, the Australian Competition and Consumer Commission (ACCC), expressed significant concerns on Thursday regarding Sigma Healthcare’s proposed merger with retailer Chemist Warehouse Group. The merger, valued at A$8.8 billion ($5.9 billion), would create a formidable entity in the pharmaceutical wholesale and retail market.

The ACCC highlighted in a statement that the integration of Sigma’s wholesale operations with Chemist Warehouse’s retail network could severely limit competition across several markets. Chemist Warehouse, known for its large stores, competitive pricing, and extensive advertising campaigns, is a dominant player in Australia’s pharmacy sector. Meanwhile, Sigma Healthcare is a major wholesaler and distributor of prescription medicines and other health products.

Following the ACCC’s announcement, Sigma’s shares experienced a significant drop, falling 4.56% in afternoon trading after an earlier decline of nearly 11%.

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In response to the ACCC’s concerns, Sigma Healthcare stated that it would work closely with the regulator throughout the competition review process. Sigma acknowledged that the ACCC’s statement of issues was anticipated given the complexity of the proposed transaction. Similarly, Chemist Warehouse committed to full cooperation with the ACCC, ensuring that the regulator has all necessary information to complete its assessment.

The merger proposal, first announced in December, involves Sigma acquiring Chemist Warehouse in exchange for a stake in the combined entity and A$700 million in cash. This arrangement would effectively enable Chemist Warehouse to be publicly listed through Sigma. Post-merger, Chemist Warehouse is set to own 85.8% of the merged company, which would supply 1,000 Sigma-aligned pharmacies and own 600 Chemist Warehouse outlets.

The ACCC warned that the merger could disadvantage pharmacies not included in the merged group, potentially leading to higher costs and reduced competitiveness. A final decision from the ACCC on the merger is expected on September 5.

Source: Reuters