(Reuters) – Australia’s Sigma Healthcare on Monday said it would merge with privately owned pharmacy giant Chemist Warehouse Group to create a company with a market capitalisation of more than A$8.8 billion ($5.79 billion).
Chemist Warehouse will own 85.8% of the merged company post completion, Sigma said.
Chemist Warehouse is a retail pharmacy franchisor with a multi-national retail network of around 600 stores.
The proposed merger will be effected by Sigma acquiring Chemist Warehouse in exchange for a stake in the company and A$700 million in cash.
The proposed merger will create cost synergies initially estimated at about A$60 million per annum, expected to be realized four years post completion.
“The combined group will have extensive capabilities and expertise to benefit franchisees and customers, including through more brand choice, products and services and expanded marketing capabilities,” Chairman Michael Sammells said.
Sigma is also undertaking an entitlement offer to raise about A$400 million to provide the working capital required to implement a supply contract with Chemist Warehouse starting July 1, 2024, among others.
Post completion, Sammells would be the independent chair of the merged entity and Vikesh Ramsunder, the CEO and managing director of Sigma, would also remain as CEO and managing director of the merged company.
Mark Davis would be appointed the chief financial officer of the merged company.
Chemist Warehouse founders Mario Verrocchi and Jack Gance, would also hold executive positions on the board of the merged company, Sigma said.
The Sigma board unanimously recommends that shareholders vote in favour of the merger, the company said.
Chemist Warehouse did not immediately respond to a Reuters request for comment.
($1 = 1.5209 Australian dollars)
(Reporting by Echha Jain in Bengaluru; Editing by Maju Samuel, Lisa Shumaker, Mark Porter and Marguerita Choy)
