ACCC greenlights Sigma Healthcare, Chemist Warehouse merger

The Australian competition regulator has greenlit Sigma Healthcare’s (ASX:SIG) plans to merge and thereby reverse list Chemist Warehouse.

Both companies accepted a court-enforceable undertaking at the Australian Competition and Consumer Commission (ACCC’s) direction, winning its favour.

This effectively represents a guarantee the ASX will see Chemist Warehouse hit the domestic bourse, though, without the fanfare of an IPO. Still, its been one of the most hotly anticipated arrivals this year.

That undertaking ultimately relates to keeping competition in the market fair, with pharmacies engaged in “longer term contracts” with Sigma at this time able to readily switch wholesalers should they wish.

“Critical to our conclusion that a substantial lessening of competition is unlikely [as a result of the merger] is the competitive constraint provided by competing wholesalers including API, EBOS, and CH2,” ACCC chief Gina Cass-Gottlieb said.

All three of those competing wholesalers hold Commonwealth contracts to distribute PBS-listed medicines.

The ACCC decision will likely be taken with umbrage over at the Australian Pharmacy Guild who late last month said the merger should not be able to go ahead.

But the regulator – so long as Sigma’s customers can switch wholesalers – has determined that Sigma (or, more to the point, Chemist Warehouse) won’t be able to dominate the market.

There was one interesting note from the regulator in its Thursday presser.

“For reasons including changes to the pharmacy regulatory environment, the ACCC also found that a combined Sigma Chemist Warehouse is unlikely able to influence Sigma banner pharmacies to the same extent Chemist Warehouse influences its current franchisees.”

“There is and will continue to be effective competition at all levels of the pharmacy supply chain, capable of constraining a combined Sigma Chemist Warehouse,” Cass-Gottlieb added.

SIG last traded at $1.95.

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