The Australian Competition and Consumer Commission (ACCC) has raised significant concerns regarding the proposed merger between Chemist Warehouse and Sigma Healthcare, warning that it could severely impact competition within the pharmacy sector and potentially lead to higher prices for consumers.
In its preliminary statement of issues, the ACCC highlighted several areas of concern surrounding the $8.8 billion deal, which would combine the largest pharmacy chain by revenue with a major wholesaler to independent pharmacies. ACCC Commissioner Stephen Ridgeway emphasized that such a merger represents a substantial structural change in the industry, potentially limiting competition and affecting service quality and pricing.
“The merger could create a new business model that erects barriers to competition, thereby reducing the ability for other players to enter or expand in the market,” Mr Ridgeway stated. He expressed worries that the merged entity might favor Chemist Warehouse stores over non-bannered competitors, thereby potentially raising costs for competitors and diminishing their competitiveness.
Sigma Healthcare, which operates numerous retail stores and distribution centers across Australia under brands such as Amcal and Discount Drug Stores, acknowledged the ACCC’s concerns as anticipated given the scale of the merger. CEO Vikesh Ramsunder affirmed Sigma’s commitment to cooperate closely with the ACCC throughout the merger review process.
Under the terms of the proposed deal announced in December, Chemist Warehouse would absorb Sigma Healthcare, forming the largest pharmaceutical retailer in Australia and paving the way for Chemist Warehouse’s listing on the Australian Securities Exchange. Following the ACCC’s announcement, Sigma’s share price experienced a decline of more than 6% during trading.
The ACCC is currently accepting submissions regarding the merger until June 27 and is expected to reach a final decision on September 5 regarding whether to approve or block the merger, pending further review and consultations with stakeholders.
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