Sigma/Chemist Warehouse merger nears the finish line

The transformational merger of Chemist Warehouse Group and Sigma Healthcare has cleared the final hurdles, with both Sigma and Chemist Warehouse shareholders voting to approve the proposed transaction. Implementation of the merger is scheduled for 12 February, with the combined entity having an estimated market capitalisation of c.$35 billion (based on the Sigma closing price on 28 January). 

Completion of the merger will place Sigma into the top 50 companies on the ASX - creating a combined entity of over 1000 franchised pharmacies across a growing Australian and International footprint together with a full-line pharmaceutical wholesaler and distributor.

The Chemist Warehouse Group trading update released on 28th January showcased the continued strength in the business model, with Sigma trading +12% on the announcement. 

Chemist Warehouse Group reported strong like-for-like sales growth (Australia: 10.4%, International: 9%) alongside an impressive +400bps of EBIT margin expansion in 1H25. The company also highlighted store growth of +19 new store openings in 1H25 (including 2 new stores in Dubai), alongside initiatives to transition Chemist Warehouse’s wholesale supply chain to Sigma.

The strong first half result for Chemist Warehouse Group demonstrates the ability of management to grow sales without compromising its costs and margins, with a track record of significant like-for-like growth over recent periods.

Given synergies from harmonising the Chemist Warehouse supply chain with Sigma are yet to be implemented and further network expansion is anticipated, the combined business is facing significant tailwinds to earnings in future periods. With scarce opportunities on the ASX to invest in a sector leader with such a compelling runway for growth, and with potential inclusion in the key S&P/ASX 200 index in late March expected to provide ongoing share price support, we look forward to being a shareholder in the combined entity.

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