- Through a binding term sheet, Sigma Healthcare (SIG) will supply its Pharmaceutical Benefits Scheme (PBS) medicines and Fast-Moving-Consumer-Goods (FMCG) products to Chemist Warehouse
- Sigma estimates the total sale of products to Chemist Warehouse will generate a
minimum of $3 billion in revenue the first full year of the five-year contract - Sigma will distribute 10.7 per cent of its shares to Chemist Warehouse at 64.2 cents per share, and Chemist Warehouse will have the right to acquire non-core assets from Sigma valued at $24.5 million
- The company expects the terms of the supply contract will support its medium-term EBIT margin guidance of 1.5 to 2.5 per cent, with further discussions aimed for June
- SIG shares are up 22.1 per cent, trading at 77 cents at 2:15 pm AEST
Sigma Healthcare (SIG) has signed a binding term sheet with Chemist Warehouse to supply its Pharmaceutical Benefits Scheme (PBS) medicines and Fast-Moving-Consumer-Goods (FMCG) products.
The company’s current FMCG contract will be renewed as part of the agreement, and SIG will secure the additional supply of PBS medicines to Chemist Warehouse for a five-year term, starting July 1 2024.
Sigma estimates the total sale of products to Chemist Warehouse will generate a
minimum of $3 billion in revenue in the first full year of the contract.
“The decision by Chemist Warehouse to award Sigma this supply contract is wonderful news for our company and our shareholders,” Sigma CEO Vikesh Ramsunder said.
“The contract allows us to leverage our highly automated distribution centres and latent spare capacity after multiple years of investment.
We thank Chemist Warehouse for their confidence in our service capability and awarding of the contract.”
The supply agreement includes the distribution of Sigma shares to Chemist Warehouse at the start of the supply contract, representing approximately 10.7 per cent of SIG’s issued share capital at 64.2 cents per share.
Chemist Warehouse will hold the rights to acquire certain non-core assets from Sigma valued at $24.5 million. However, if Chemist Warehouse chooses not to acquire those assets, Sigma will make a net cash payment of $24.5 million.
With SIG’s current agreement with Chemist Warehouse ending in June 2024, there will be no impact on Sigma’s existing financial year 2024 EBIT guidance, which ranges from $26 million to $31 million.
The company expects the terms of the supply contract will support its medium-term EBIT margin guidance of 1.5 to 2.5 per cent, while further discussions with Chemist Warehouse are aimed to be completed by June 30 2023.
SIG shares were up 22.1 per cent, trading at 77 cents at 2:15 pm AEST.