- Sigma is a wholesale drug distributor with a network of branded franchised pharmacies.
- Chemist Warehouse has a network of more than five hundred discount drug stores.
- The proposed merger of the two companies is likely to face regulatory hurdles.
On 10 December of 2023 Sigma Healthcare emerged from a trading halt with the two-fold blockbuster announcement of a proposed merger with Chemist Warehouse and an institutional and retail capital raise to fund the deal. The share price got a bump as investors responded positively to expert analysis of the benefits of the merger.
Source: ASX
Year over year the share price is up 57% cooling off a bit after the large jump, but remaining stable, offering investors a chance to get in before a likely boost when the deal is approved.
The company’s financial performance prior to the merger has been solid, if not spectacular. Sigma’s wholesale distribution of regulated drugs limited financial performance. The large network of pharmacies offers the combined company the opportunity to benefit from the sale of non-regulated items.
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Sigma Healthcare Financial Performance
Source: ASX
Sigma cut its dividend payment at the height of COVID and returned with lower dividends in the aftermath, with a five year average dividend payment of $0.02 per share and a five year average yield of 3.04%.
An analyst at Morgans has a BUY recommendation on Sigma Healthcare shares, commenting that the merger “will create a healthcare wholesaler, distributor and retail pharmacy franchisor. The proposed merger may unlock significant efficiencies and generate cost synergies.”
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