fbpx

Wyndham TV

News in Wyndham

ACCC Sounds Alarm on Sigma’s Chemist Warehouse Takeover

Chemist Warehouse Hoppers Crossing
  
   

Potential Merger Could Lead to Higher Prices and Reduced Service Quality, ACCC Issues Urgent Call for Public Feedback

In a recently published Statement of Issues, the Australian Competition and Consumer Commission (ACCC) has outlined significant competition concerns regarding Sigma Healthcare Limited’s (ASX: SIG) proposed acquisition of Chemist Warehouse Group Holdings.

Little-Learners_1080-x-1080

The proposed merger involves the largest pharmacy chain by revenue combining with a key wholesaler that supplies thousands of independent pharmacies, creating a potential shift in the pharmacy sector’s structure. ACCC Commissioner Stephen Ridgeway emphasized the importance of this transaction, noting the potential impact on competition at both retail and wholesale levels.

“We have identified a range of preliminary competition concerns,” Ridgeway stated. “This major structural change could raise barriers to rivals expanding or entering the market, which may lessen competition.”

Sigma, a prominent wholesaler of prescription medicines, over-the-counter (OTC) products, and front-of-store (FOS) items, also provides brand and support services to community pharmacies under several banners, including ‘Amcal +’ and ‘Guardian’. Chemist Warehouse, a franchisor of around 600 pharmacies, operates under various brands such as Chemist Warehouse and MyChemist. The company also functions as a wholesaler and distributor.

The ACCC highlighted that the merged entity would be uniquely vertically integrated across multiple levels of the pharmacy supply chain, potentially disadvantaging rival pharmacies. The ACCC expressed concern that the merger might enable Chemist Warehouse to access commercially sensitive data from Sigma-supplied pharmacies, undermining competition.

Another significant concern is the potential for the merged company to favour Chemist Warehouse stores over non-Chemist Warehouse banner stores, thereby increasing costs and reducing competitiveness for independent pharmacies. The ACCC also pointed out the potential reduction in service quality and higher prices for consumers due to decreased competition.

The transaction involves Sigma acquiring all shares in Chemist Warehouse in exchange for Sigma shares and a $700 million cash consideration, resulting in Chemist Warehouse shareholders holding 85.75% of the ASX-listed merged entity.

The ACCC has invited submissions from interested parties by 27 June 2024, emphasizing that the key issue remains the acquisition’s impact on competition in the supply of pharmaceutical products.

For more information or to submit feedback, parties can contact the ACCC via SigmaCWG@accc.gov.au.

Background on Sigma and Chemist Warehouse

Sigma Healthcare Limited:
– ASX-listed wholesaler and distributor.
– Supplies over 4,000 community pharmacies.
– Operates under banners such as ‘Amcal +’, ‘Discount Drug Stores’, and ‘Guardian’.
– Provides brand and support services, private label products, and technology and data analytics solutions.

Chemist Warehouse Group Holdings:
– Franchisor of approximately 600 pharmacies.
– Operates under brands such as Chemist Warehouse, MyChemist, Ultra Beauty, and Optometrist Warehouse.
– Provides media, marketing, and financial support services.
– Owns private label product brands and operates six distribution centers.

The ACCC’s investigation continues as it seeks to ensure the proposed merger does not harm competition within the pharmacy sector.

1900x400 Elections Banner