Sigma and Chemist Warehouse merger

Hi both,

The SIG/Chemist warehouse tie up is a big one and will create an ASX company worth just shy of ~$9bn which will make it the 50-60th largest listed company – a win for the ASX getting such a big company on the boards via a good old ‘back door’ listing. The latest Chemist Warehouse accounts, for the 12 months to June 30, show the company had revenues of $3.09bn, up from $2.99bn one year earlier. Sigma recently said it’s on track to achieve FY24 earnings before interest and tax (EBIT) of between $26 million and $31 million. Sigma also said in FY23, the Sigma and Chemist Warehouse businesses combined made EBIT of around $500 million. So, its on 17x EBIT or on our crude numbers, SIG might make a net profit of something like $350m, putting it on something like 25x earnings, stressing these are back of the envelope calculations. The market likes the deal (clearly), however we’d be more inclined to see the SP settle.

With regard to the impact on McPherson’s (MCP), we haven’t given this a lot of thought/research, we don’t own the $77m market cap MCP. Thinking on the run, MCP benefit from distribution – which Chemist Warehouse presumably provides them, however, Sigma will be able to increase their distributions capability further, which would ultimately be a positive if it happened.

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Sigma Healthcare (SIG)

LAST UPDATED 16/12/2023 07:32

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Sigma Healthcare (SIG)

LAST UPDATED 16/12/2023 07:32