SIG - Sigma Healthcare

[divs4ever]

I need some clarification, so please tell me where I am wrong.

As I have said all along, I was confident that the merger would proceed.
However, I must be missing something because the part I just could not understand was the valuation per share after the merger.
The merged business is said to be worth around $7 billion which compares with EBOS which is about the same size with a market cap of $6.5 billion.

Let's say the value of the merged entity is a bit higher and worth $8 billion. After the merger there will be a total of 11.56 billion share on issue. Some will be in escrow for a couple of years, BUT 11.56 bil total.
If I divide the $8b mc by the 11.56 bil shares, I get 69 cents per share.
Going the other way, if I multiply the current share price by 11.56 billion I get a market cap of $28 billion which let's face it, is a tad high.

Can somebody tell me where I am wrong so I can kick myself for missing out on the 26% increase today.

View attachment 187497

the math never worked for me , so i hit the parachute as soon as i read the details of the merger deal .

if the holders are still in profit and happy , good for them , i crystallized an acceptable profit , so i am content

 

[Dona Ferentes]

Chemist Warehouse’s billionaire founders have cleared the final hurdle in their long-held ambition to create a listed pharmacy and retail giant, saying they have big ideas for the group which will start trading on the ASX next month after shareholders backed their $30 billion merger deal.

The reverse takeover of Sigma Healthcare, a wholesaler and franchiser with brands such as Amcal and Discount Drug Stores, has taken more than a year to be approved by regulators and finally, on Wednesday, shareholders.

The deal, which was approved in a 16-minute meeting at a Melbourne pub, will shake up the highly regulated pharmacy industry, creating a business with almost 1000 stores and annual earnings of $1 billion.

 

[Dona Ferentes]

ADVANTAGES OF THE TRANSACTION
The advantages of the proposed merger are many and varied, with the potential to create significant value for Sigma shareholders, which is already evident in the share price accretion since announcement.

The proposed merger will create a leading Australian retail pharmacy franchisor and a full-line pharmaceutical wholesaler and distributor with a wide range of growth opportunities, both within Australia and Internationally. And the
complementary nature of both businesses creates a unique opportunity to extract significant cost synergies from bringing the businesses together. Management estimates put the potential cost synergies at $60 million per year that could be realised by the fourth-year post implementation. One-off costs to extract the enduring benefits is estimated at $75 million.

Whilst the merits of the proposal are clear, it is worth noting that if for any reason the proposal does not proceed, the trading price of Sigma shares may fall in the near term.

And finally, we acknowledge the extent of the related party transactions that currently exist, which are part of the Chemist Warehouse business and its evolution. I believe we have introduced a robust solution to govern and manage related party transactions moving forward....

PROPOSED SIGMA BOARD OF DIRECTORS
If the merger proceeds, Sigma and Chemist Warehouse have agreed on the composition of our proposed Board. Today we are seeking your approval for the election onto the Sigma Board of Mr Jack Gance, Mr Mario Verrocchi, Mr Damien Gance and Ms Danielle Di Pilla. They will join existing Board members being myself as Chairman, Vikesh Ramsunder, who will be CEO & Managing Director of the merged group, Dr Chris Roberts, Annette Carey and Neville Mitchell. Kara McGowan will continue as Company Secretary and General Counsel.

From my perspective, I am confident we have a strong Board with the requisite mix of skills and expertise from both the Sigma and Chemist Warehouse sides of the business. Having said that, we are also conscious that the composition of the Board does not meet the diversity and inclusion ratios, or the independence ratios expected of an ASX listed company, and this is something that we as a new Board will seek to address over time.

The one change from Sigma’s existing Board is the retirement of Kate Spargo following implementation of the transaction. Kate has been a Director of Sigma for more than nine years and was Chair of the Nomination and Remuneration Committee. Kate has been a highly valued member of the Board and I want to thank Kate for her significant contributions to the Board and Sigma more broadly.

 

[Logique2]

In my entry, Tipping Comp 2025, as at: Thu 30 Jan ..not c.o.b. yet.

Market is loving the merger with Chemist Warehouse. SIG sp went + 12% in a day earlier in the week.

Chemist Warehouse is a strong and profitable business.

2.98 ; + 11.2% YTD

 

[Logique2]

Good day, ASX announcement that the market liked.
Under is excerpt only, my bolds:

ASX Release
7 February 2025
Sigma FY25 trading update
2.97 ; +0.145 ; + 5.12%

"Sigma Healthcare Limited (ABN 15 088 417 403) has today upgraded its full year normalised EBIT guidance for the year ending 31 January 2025 to $64 to $70 million, up from the $50 to $60 million range previously guided in September 2024.

The upgrade follows improved operational performance, including the strong execution of the new Chemist Warehouse supply contract that commenced on 1 July 2024, demonstrating our ability to efficiently absorb volume growth.

Subject to audit completion, FY25 Statutory NPAT will be significantly impacted by non-recurring costs relating to the merger, including impacts of changes to existing performance rights as approved at the Sigma EGM.

Sigma’s full year audited results are anticipated to be released to the ASX in mid March 2025.

This announcement is authorised by order of the Board.."

 

[Sean K]

Chemist Warehouse joins through the backdoor.

It looks like the deal has been good for Sigma holders.

 

[Dona Ferentes]

On Wednesday evening, two block trades saw 63.5 million shares change hands at $2.80 to $2.75. Barrenjoey traded $65.8 million worth of Sigma shares, while Unified Capital Partners traded a bigger $110 million piece. There are still 4.1 billion shares in the hands of un-escrowed franchisees expected to be coming up for sale.

 

[Dona Ferentes]

a columnist has suggested 5 fundamentals of the CW story
.

Focus on what matters​

The Gance brothers and Verrocchi grew up working in their families’ milk bars. Not only was this experience formative as they moved into the pharmacy business in the 1970s, but it guides the approach today. “We learned that the only person important in a transaction is the customer,” Sam Gance says of his milk bar days. “And we always focused on what the customer wanted, and if we could provide it, we knew we’re going to be successful. What does the customer want? Can we provide it to him? And if we can, guess what? We’ll keep him.”

Challenge convention​

When the trio started running chemist shops, the model was that about 60 per cent of revenue was generated from dispensing prescriptions, while the other 40 per cent came from the front of the store. The Chemist Warehouse model was an assault to that convention, with the majority of revenue driven from the vast range of healthcare, beauty and wellness products that dominate each shop. The model was also set up to defy the strict (and protectionist) rules set up to restrict pharmacy expansion.
But Jack Gance says the biggest challenge to pharmacy sector convention was an economic one. Most chemists were operating on a margin of about 40 per cent, so the trio started with a big, crazy idea: what if we offered a 25 per cent discount on everything? Chemist Warehouse then worked backwards from there, figuring out how it could drive down costs like rent and labour, how it could extract rebates and advertising subsidies from suppliers, and how to get the balance right between volume and profit. Bold, brave thinking.

Stand out​

Everybody who shops at Chemist Warehouse knows it’s an assault on the senses – and that’s very deliberate. “We overwhelm our customers with great value and surprises, and it’s an enjoyable experience,” Jack Gance. “They walk through our store and they see things that they didn’t come in to buy, but they’re well priced, good products that are well promoted. And so as a result of that, we actually grab the market.” Verrocchi says the lessons learnt back at the milk bar – “the higher the stack of boxes, the more you sold” – helped inform the in-store approach. “You don’t put two items on the shelf, you put 24. You don’t put a little ticket, put a big yellow sticker on it. A lot of the original traits are still there,” Verrocchi says.

Clarity of decision-making​

Verrocchi and the Gance brothers are larger-than-life characters and after decades in business, it’s not hard to imagine a few lively boardroom discussions along the way. But there’s one rule that has kept them on track: there’s no voting on big decisions, the call has to be unanimous. “If I feel that something’s wrong, I’ll argue the case. But ultimately, I’m going to go along with the major consensus, because we all have got to agree,” Jack Gance says.

Nothing beats hard work​

Up until very recently, Jack Gance says Verroccchi would help prepare for every new store opening by grabbing a box cutter and opening cartons for hours on end. “I said, ‘Mario, you’ve got more important things to do.’ But it’s important that you show none of us – none of us – are afraid to roll our sleeves up and get our hands dirty.” Verrocchi says this is the real secret sauce: a culture of just smashing through. “It’s the culture of getting things done. It’s the culture of coming in early and working late. It’s the culture of ‘it’s never too hard, it’s not impossible’. If you’re working hard enough, you’ll end up getting there.
.
I'd suggest 2 more
- employ lots of entry level pharmacists
- have really narrow aisles, and stack to the ceiling

CW is cheaper than the other chains

 

[Dona Ferentes]

On Wednesday evening, two block trades saw 63.5 million shares change hands at $2.80 to $2.75.... There are still 4.1 billion shares in the hands of un-escrowed franchisees expected to be coming up for sale.

SIG is now over $3 .... there's a game of cat n moose .... most franchisees are millionaires, and some 4 founders holding stock are billionaires. The big instos and indexes need to get on board, but no real killer blocks of shares have crossed yet.

from the wires a few days ago

several investment banks over the past few weeks have pitched Chemist Warehouse the idea of facilitating one monster block trade – or a structured facility – that mops up all its franchisees itching to get rich. However, these bankers have been turned away and told that rolling multiple sellers into one pre-arranged trade may not be legally kosher. Come Thursday, it will be up to individual franchisees to find their way to the exit.