Sydney — Sigma Healthcare, an Australian drug supplier, has announced its agreement to merge with CW Group, a privately-owned pharmacy operator. This merger will create a new listed company worth more than A$8.8 billion (US$5.79 billion).
Under the terms of the merger, Sigma will pay A$700 million in cash and issue new shares to CW Group, allowing the latter to own 86% of the combined company. Shareholders of Sigma will retain ownership of the remaining portion. Sigma has a current market capitalization of A$810.4 million.
To finance the cash component of the deal and refinance CW Group’s existing debt, Sigma has secured a new A$1 billion debt facility. Additionally, they plan to raise A$400 million in equity through a fully underwritten entitlement offer.
The merger will result in the creation of a combined healthcare wholesaler, distributor, and retail pharmacy franchiser. With this development, the company will become one of the 50 largest companies on Australia’s benchmark S&P/ASX 200 index.
Both companies anticipate achieving approximately A$60 million in annual cost savings within four years of the merger. CW Group currently operates around 600 stores, primarily under the Chemist Warehouse brand.
Sigma Chairman, Michael Sammells, expressed excitement about the merger, stating, “With Sigma having had a commercial relationship with CWG and its founders spanning more than 40 years, we are excited by the efficiencies, synergies, and growth opportunities that we anticipate being unlocked.”
After the merger, Sammells will serve as Chairman of the combined entity, while Sigma Chief Executive, Vikesh Ramsunder, will become CEO. Mario Verrocchi, co-founder and CEO of CW Group, will continue to lead the pharmacy business and become an executive director. Jack Gance, co-founder of CW Group, will also join the board.
The merger is subject to approval by Australia’s competition watchdog and has garnered support from Sigma shareholders HMC Capital and HMC Capital Partners Fund.