Australia's Sigma hits 18-yr high on offering concessions for Chemist Warehouse merger

By Himanshi Akhand and Roushni Nair

(Reuters) -Shares of Sigma Healthcare shot to their highest levels in 18 years on Tuesday, after the Australian healthcare group offered three major concessions to facilitate its A$8.8 billion ($6.09 billion) merger with Chemist Warehouse.

Under the proposed concessions, Sigma will let franchisees who joined at the start of 2024 to opt out of their agreements without penalties for the next three years, the Australian Competition and Consumer Commission (ACCC) said in a statement.

Additionally, Sigma offered to limit how the company will use confidential information from its wholesale customers and franchisees for the next three years.

The company is also committing to remain a participating pharmaceutical wholesaler under the Commonwealth Government's Community Service Obligation program for at least five years, ensuring it meets specific service standards and compliance requirements.

The ACCC has delayed its decision on the Sigma-Chemist Warehouse deal to Nov. 7 from Oct. 24 to allow for further consultation on the concessions, it said.

Shares of Sigma soared 18.06% as of 0346 GMT to their highest levels since mid-February 2007. The stock was the best performer on the benchmark index which is down 0.8%.

"We note that this list of undertakings could change/be extended by the ACCC, but see it as a positive that the process is progressing in a constructive manner and that the final decision date has not been pushed out significantly," Tom​​​​ Godfrey, senior research analyst at Ord Minnet said in a note.

The ACCC said it was seeking feedback from stakeholders on whether the draft undertaking offered by Sigma might be capable of addressing competition concerns.

Chemist Warehouse is a privately owned pharmacy and retail chain known for cheap prices and large stores, while Sigma is a wholesaler and distributor of prescription medicines and other products.

The proposed deal, announced in December, would see Sigma acquiring Chemist Warehouse in exchange for a stake in the company and A$700 million in cash, allowing Chemist Warehouse to be effectively backdoor listed through Sigma.

Acknowledging the ACCC's decision to start a consultation process, Sigma said it would work with the regulator.

($1 = 1.4445 Australian dollars)

(Reporting by Himanshi Akhand and Roushni Nair in Bengaluru; Editing by Subhranshu Sahu, Alan Barona and Varun H K)