The Australian Competition and Consumer Commission (ACCC) has raised preliminary competition concerns with Sigma Healthcare’s proposed merger with Australian pharmacy retailer Chemist Warehouse Group to form an A$8.8bn ($5.9bn) entity.
According to the ACCC, the planned integration at both wholesale and retail levels could curb competition in various markets.
Sigma Healthcare, which is listed on the Australian Securities Exchange (ASX), operates as a wholesaler and distributor of prescription medications, over-the-counter, and front of store products.
On the other hand, Chemist Warehouse operates as a privately owned pharmacy and retail chain in Australia. It has brands like MyChemist, My Beauty Spot, Ultra Beauty, and Optometrist Warehouse.
The ACCC indicated that the proposed deal could negatively impact pharmacies currently supplied by Sigma Healthcare. This can result in a significant reduction in competition within the pharmacy retail sector, said the Australian competition watchdog.
Additionally, the merger might empower Chemist Warehouse to obtain and use commercially sensitive data associated with pharmacies supplied by Sigma Healthcare, which will potentially undermine competition, said the ACCC.
Furthermore, the competition regulator is concerned that the proposed deal could significantly diminish competition in pharmacy retailing by lowering the competitive pressure exerted by both firms’ banner stores on each other.
The ACCC is also expressing concern that the transaction could affect upstream markets for the supply of pharmacy retail products.
However, the Australian agency has not yet arrived at a definitive conclusion regarding any of the concerns.
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.”
The proposed deal, announced in December last year, entails Sigma Healthcare acquiring Chemist Warehouse in exchange for a stake in the enlarged company and A$700m in cash.
In the merged entity, Chemist Warehouse will hold an 85.8% ownership stake while Sigma Healthcare’s shareholders will hold the remaining stake. The combined company will serve 1,000 Sigma Healthcare-aligned pharmacies while owning around 600 outlets of Chemist Warehouse.
