“Australia’s Competition Watchdog Expresses Major Concerns Over Sigma Healthcare’s Merger with Chemist Warehouse Group”
The Australian Competition and Consumer Commission (ACCC) raised significant concerns on Thursday regarding Sigma Healthcare’s proposed merger with retailer Chemist Warehouse Group, forming an A$8.8 billion ($5.9 billion) company.
In a statement, the ACCC highlighted that the proposed integration across wholesale and retail levels could stifle competition in various markets, posing a threat to competition within Australia’s pharmaceutical sector.
Chemist Warehouse, a privately-owned pharmacy and retail chain known for its competitive pricing, extensive stores, and robust advertising campaigns, stands in contrast to Sigma, a wholesaler and distributor of prescription medicines and other products.
Sigma’s shares plummeted nearly 11% in early trade on Thursday, hitting their lowest level since February 21, according to LSEG data. A final decision from the ACCC is expected on September 5.
Sigma announced its intention to closely cooperate with the ACCC as part of the regulator’s competition review process. The company noted that the ACCC’s statement of concerns was anticipated given the complexity of the transaction.
Chemist Warehouse has yet to respond to requests for comment.
The proposed deal, revealed in December, entails Sigma acquiring Chemist Warehouse in exchange for a stake in the company and A$700 million in cash, effectively allowing Chemist Warehouse to be listed through Sigma.
Under the terms of the agreement, Chemist Warehouse will hold an 85.8% stake in the merged entity, which will supply 1,000 Sigma-aligned pharmacies and operate 600 Chemist Warehouse outlets.
The regulator expressed concerns that the deal could lead to increased costs for pharmacies not part of the merged group, potentially reducing their competitiveness.
“The primary concern is whether the proposed acquisition will weaken competition in the pharmaceutical products supply chain,” stated ACCC Commissioner Stephen Ridgeway.
The ACCC also voiced apprehension that the merged entity would gain access to commercially sensitive data belonging to Sigma’s existing pharmacy customers.
