Will Sigma's proposal cure competition woes?

Company News

by Glenn Dyer

Shares in Sigma Healthcare (ASX:SIG) jumped more than 25% yesterday after the ACCC invited submissions. This was in relation to the pharmacy wholesaler's proposed court-enforceable undertaking regarding its $700+ million acquisition of Chemist Warehouse.

The Commission published a statement of issues in June which revealed a range of preliminary competition concerns with the proposed acquisition -- one of which was covered by yesterday’s statement.

These concerns included the potential harm to pharmacies currently supplied by ASX-listed Sigma and the potential for Chemist Warehouse to access these pharmacies' data in ways that might damage or restrict competition.

In response, Sigma's undertaking would require the prescription medicine wholesaler to:
  • Not prevent or hinder franchisees who entered into their franchising arrangements prior to 1 January 2024 from terminating their franchise agreements with Sigma for a period of three years;
  • Place restrictions on the collection, use and disclosure of confidential data and information from Sigma wholesale customers and franchisees for a period of three years; and
  • Remain a participating pharmaceutical wholesaler under the Commonwealth Government's Community Service Obligation arrangements for at least five years, which means meeting certain service standards and compliance requirements for wholesaling of prescription medicines to all pharmacies.
The Commission invited submissions on the proposed undertaking by 14 October and has pushed back its decision on the merger to 7 November 2024 from the previous deadline of 24 October.

But it also said in Tuesday’s statement that it was "continuing to investigate the impact of the proposed acquisition".

“While the ACCC is publicly consulting on this undertaking, this should not be interpreted to mean that this or any other form of undertaking will ultimately be accepted by the ACCC,” Ms Cass-Gottlieb said.

Judging by the way the shares leapt 25% on Tuesday, some investors seem to think that this announcement could see the deal approved.

It is a step, but there’s a long way yet, and there remain competition concerns around some specific geographic locations, such as parts of Melbourne, although the undertaking could allow those potential problems to be handled in a final settlement. 

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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