Sunday, December 22, 2024

Major change to Chemist Warehouse could spell trouble for Aussies

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The Australian Competition and Consumer Commission has raised concerns about a pharmaceutical company attempting to acquire one of Australia’s largest pharmacy retailers.

Sigma Healthcare Limited has attempted to enter into a merger with pharmacy retailer Chemist Warehouse in a deal estimated to be worth more than $8.8 billion.

The proposed merger would enable the company to have end-to-end control of the pharmaceutical supply chain including creation, distribution, wholesale, and retail.

In a statement released on Thursday, the ACCC outlined concern with the deal and said the merger “weakens competition” and hurts pharmacies.

“This is a major structural change for the pharmacy sector, involving the largest pharmacy chain by revenue merging with a key wholesaler,” ACCC Commissioner Stephen Ridgeway said.

“We have identified a range of preliminary competition concerns, including at the retail level and as a result of the proposed integration of the merged firm across the wholesale and retail level.

“We want to hear from interested parties, including rival pharmacies, as we continue this review.”

Sigma has become one of the largest wholesalers of prescription medicines in Australia and also owns about 400 pharmacies, including retail brands Amcal and Guardian Pharmacy.

Meanwhile, Chemist Warehouse Group owns and operates over 500 stores in Australia, including My Chemist and My Beauty Spot.

Integration of the companies would lead to a combined total of more than 900 stores, nearly doubling the current market leader TerryWhite Chemart, which has about 550 stores.

The move could disadvantage independent and rival pharmacies who may face unfavourable terms and increased costs compared to Chemist Warehouse.

“The transaction would create a merged company that is uniquely vertically integrated across multiple levels of the pharmacy supply chain,” Mr Ridgeway said.

“This new business model for the pharmacy sector could raise barriers to rivals expanding or entering, which may lessen competition.”

Sigma has said it expected the proposed merger to come under scrutiny due to the size and complexity of the deal.

Sigma CEO Vikesh Ramsunder said: “We are co-operating closely with the ACCC and look forward to continuing to do so in the next phase of the merger review.”

“The proposed transaction will ensure that Sigma, consistent with its regulatory obligations, can continue to serve franchisee and independent pharmacies alike.”

Following the proposed deal’s announcement in December, Sigma’s share price on the Australian Stock Exchange jumped more than 40 per cent in a week.

Sigma’s share price has fallen by about six per cent during trade on Thursday following the ACCC’s announcement.

The ACCC has invited submissions from interested parties until June 27 and will make a final decision on September 5.

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