CHEMIST Warehouse (CWH) will own over 10% of Sigma Healthcare under a share placement which is part of this morning's new deal for the supply of PBS and FMCG product (PD breaking news).
The wholesaler was already providing FMCG items to Chemist Warehouse, with today's announcement confirming just that part of the contract already comprises almost 30% of Sigma's overall revenue.
Sigma estimated that the total sales of products to Chemist Warehouse will generate at least $3 billion in revenue in the first year of the contract.
"The decision by Chemist Warehouse to award Sigma this supply contract is wonderful news for our company and our shareholders," said Sigma CEO Vikesh Ramsunder.
"The contract allows us to leverage our highly automated distribution centres and latent spare capacity after multiple years of investment," he said.
Sigma will issue 126 million shares worth $81 million to Chemist Warehouse, which will also have a right to acquire "certain non-core assets" from Sigma, which are valued at $24.5 million.
If Chemist Warehouse chooses not to acquire those assets then Sigma will make a net cash payment of $24.5 million.
Ramsunder thanked Chemist Warehouse for its confidence, saying "Sigma has worked tirelessly the past 12 months to build a stronger company and significantly improve our operational performance for the benefit of all customers".
"Securing this Chemist Warehouse contract means we will now have real scale and momentum moving into the future," he enthused.
Shares in EBOS, the incumbent PBS supplier to Chemist Warehouse, were placed into a trading halt this morning just prior to the Sigma announcement.
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