SYDNEY — Australian drug supplier Sigma Healthcare
SIG,
agreed to merge with privately owned pharmacy operator CW Group, creating a listed company worth more than 8.8 billion Australian dollars (US$5.79 billion).
Sigma on Monday said it would pay A$700 million in cash and issue sufficient new shares for CW Group, the operator of Australia’s prominent Chemist Warehouse pharmacy chain, to own 86% of the combined company. Shareholders of Sigma, which has a market capitalization of A$810.4 million, would own the remainder.
Sigma secured a new A$1 billion debt facility to fund the cash component of the deal and to refinance CW Group’s current debt. It also plans to raise A$400 million in equity through a fully underwritten entitlement offer.
The merger will create a combined healthcare wholesaler, distributor and retail pharmacy franchiser, Sigma said. The company would be one of the 50 largest companies on Australian’s benchmark S&P/ASX 200 index.
The companies expect to realize about A$60 million in annual cost savings within four years of the merger. CW Group operates about 600 stores, mostly under the Chemist Warehouse brand.
“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,” Sigma Chairman Michael Sammells said.
Sammells will chair the combined entity, with Sigma Chief Executive Vikesh Ramsunder becoming CEO. CW Group co-founder and Chief Executive Mario Verrocchi will continue to lead the pharmacy business and will become an executive director.
CW Group co-founder Jack Gance will also be on the board.
Sigma shareholders HMC Capital and HMC Capital Partners Fund will support the merger, which is subject to approval by Australia’s competition watchdog.