Sigma Healthcare Ltd (ASX: SIG) shares are rocketing on Thursday morning.
At the time of writing, the pharmacy chain operator and distributor's shares are up 39% to $2.71.
This follows the release of an announcement relating to its plan to merge with Chemist Warehouse.
Image source: Getty Images
Sigma shares rocket on Chemist Warehouse news
Investors have been scrambling to buy the company's shares this morning after the Australian Competition & Consumer Commission (ACCC) revealed that it will not oppose the Sigma Healthcare and Chemist Warehouse merger after accepting a court-enforceable undertaking from the former.
Commenting on the decision, ACCC Chair Gina Cass-Gottlieb said.
The ACCC found that, with the undertaking, the proposed merger is unlikely to substantially lessen competition. 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.
The ACCC's analysis found that the proposed merger is unlikely to substantially lessen competition nationally or locally because other pharmacies and non-pharmacy retailers will continue to compete to the same extent they compete now.
Cass-Gottlieb also notes that consumers will still have plenty of choices even if the merger went ahead. She adds:
Consumers value different aspects of Sigma's and Chemist Warehouse's banner pharmacies' offerings. Importantly, consumers will continue to have choice between smaller format stores offering personalised services to consumers and the Chemist Warehouse offering, focussed on larger format discount stores and front-of-store offerings.
Sigma response
This news was well-received by Sigma Healthcare. This morning, it welcomed the decision by the ACCC.
Sigma's CEO and managing director, Vikesh Ramsunder, said:
The ACCC decision marks a critical milestone for the proposed transaction and provides us with the conviction to progress with the next steps in the process. The proposed transaction has the potential to create a leading ASX listed healthcare company through the combination of the complementary strengths of Sigma's state-of-the-art pharmaceutical distribution infrastructure with Chemist Warehouse Group's retailing know-how.
We believe the proposed merger will create a stronger business and accelerate our long-term growth ambitions, for the benefit of our stakeholders.
What now?
With ACCC approval granted, the company will now push ahead with its merger plans.
Management notes that Sigma is well-advanced in preparing the documentation shareholders require to vote on the proposed transaction.
However, this documentation must be reviewed by the relevant regulators before it is despatched to shareholders. This regulatory review is anticipated to occur this calendar year, and an update on transaction timing will be provided after that regulatory review.
