Chemist Warehouse to list on ASX via reverse merger with Sigma Healthcare

Sigma Healthcare, a listed pharmacy distribution business, is reportedly nearing a significant agreement to reverse list Chemist Warehouse, a privately owned entity, on the ASX (Australian Securities Exchange) boards. This development indicates a strategic move in the pharmacy and healthcare sector, reflecting potential changes in market dynamics.

Transaction Snapshot

  • Deal value: Approximately $350 million (expected equity raise)
  • Deal type: Listing via reverse merger 
  • Equity valuation multiples: ~2.6x revenue, 26.5x profit (based on $8bn market cap)
  • Founders: Jack Gance and Mario Verrocchi (Chemist Warehouse)

Chemist Warehouse, significantly larger than Sigma Healthcare, has been advised by Rothschild, while Sigma is expected to engage Goldman Sachs for an estimated $350 million fundraising. This reverse listing, given the disparity in the sizes of the two companies, is anticipated to be akin to an IPO, providing an opportunity for bookrunners to inform potential investors about the deal.

In the fiscal year 2023, Chemist Warehouse reported substantial financial success with $3.1 billion in revenue and a net profit of $302 million, derived from its extensive network of 545 stores. In contrast, Sigma Healthcare's financial performance was more modest, with an after-tax profit of $1.8 million from $3.66 billion in revenue.

The proposed deal follows Chemist Warehouse's strategic move in June to transfer its $2 billion wholesale pharmaceuticals contract from competitor EBOS to Sigma Healthcare. This transfer, coupled with securing a 10.7 percent stake in Sigma effective from July 1, 2024, had already fueled speculations about a possible reverse listing. The founders of Chemist Warehouse, Jack Gance and Mario Verrocchi, have established relations with Sigma’s significant shareholder, HMC Capital, further cementing the groundwork for this potential merger.

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