In a groundbreaking move, Chemist Warehouse Group (CWG) is set to merge with pharmaceutical wholesaler Sigma Healthcare, forming a new retail powerhouse with an estimated market capitalisation of $8.8 billion.

Sigma Healthcare, a major player in Australia’s pharmaceutical industry, will acquire Chemist Warehouse through a deal valued at $700 million in cash and shares, making the privately held pharmacy chain’s shareholders owners of 85.75% of the combined entity.

This strategic merger, often regarded as a backdoor listing for Chemist Warehouse, will propel the newly formed company into the ranks of Australia’s top 100, making it eligible for the ASX 200.

Sigma Healthcare’s Chairman, Michael Sammells, expressed excitement about the merger, referring to it as a “step-change” that would unlock efficiencies, synergies, and growth opportunities.

The combined group aims to leverage Chemist Warehouse’s retailing and marketing expertise alongside Sigma’s cutting-edge distribution infrastructure and logistics capabilities. The merger is expected to enhance brand choices, products, services, and marketing capabilities for both franchisees and customers.

In 1995, Jack Gance and Mario Verrocchi embarked on the journey of establishing the Chemist Warehouse pharmacy business, initially launching with just five pharmacies. Fast forward to the present, and the enterprise has flourished, achieving an impressive annual revenue exceeding $3 billion, along with a widespread presence through over 600 outlets across Australia and New Zealand.

If the deal receives approval, Gance and Verrocchi will join the board, and CWG shareholders will own 85.75% of the new merged group, in addition to $700 million in cash consideration. Sigma shareholders will retain the remaining 14.25% of the merged entity.

To facilitate the implementation of the new supply contract with Chemist Warehouse, Sigma will raise $400 million in funds, managed by Goldman Sachs. However, the deal is contingent upon approvals from the Australian Consumer and Competition Commission (ACCC) and New Zealand’s Overseas Investment Office.

Shareholders from both entities will also vote on the merger, with HMC Capital, CWG’s largest shareholder, indicating support for the proposal.

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