As Chemist Warehouse mints billionaires, Crikey gets a lasagne
It was a tale of two types of access journalism at a gritty pokies pub in Preston last night, as 52 of the 311 Chemist Warehouse shareholders showed up in person to vote unanimously in favour of the $34.7 billion merger with Sigma Healthcare.
The AFR’s senior Chanticleer columnist James Thomson was inside the room and given access to the various Chemist Warehouse billionaire founders, producing this colour piece that led the website last night.
Thomson’s request for access was probably helped by the AFR declaring in December that the three Chemist Warehouse billionaire founders — CEO Mario Verrocchi, current Chemist Warehouse chair Jack Gance and his brother Sam Gance – were the papers joint 2024 AFR Business Person of the Year, alongside another billionaire, AirTrunk’s Robin Khuda. The Melbourne-based Gance brothers travelled to Sydney for the glittering black-tie dinner to accept their award.
Despite being a Sigma shareholder and a journalist, I was locked outside and forced to sit with the Computershare registry staff during the 16-minute Chemist Warehouse meeting, although billionaire Damien Gance (Sam’s son) was good enough to bring out a free serving of lasagna, produced by The Olympic hotel kitchen staff.
The Australian’s Rich List editor John Stensholt was also given access to write this story last night, which was accompanied by a fist-pumping photo of Verrocchi and Jack Gance outside the pokies pub.
Earlier in the day at Melbourne’s Sofitel Hotel at the top of Collins St, about 50 of Sigma Healthcare’s 20,000-plus shareholders gathered for a meeting where they voted overwhelmingly in favour of the Chemist Warehouse merger. There were a hefty 11 resolutions to deal with, including the appointment of four Chemist Warehouse representatives to the Sigma board.
Sadly, I was the only Sigma shareholder asking questions in the room and got up on eight of the 11 resolutions, dragging what would have been a 30-minute meeting out to almost an hour.
The incoming Chemist Warehouse nominees to the Sigma board — Verrocchi, Jack Gance, Damien Gance and Mario’s cousin Danielle Di Pilla — all sat in the front row but refused to give stump speeches or even answer questions.
Jack offered up nothing when I asked why his brother Sam wasn’t joining the Sigma board when both of them will own more than $4 billion in stock individually, based on Sigma’s closing price of $3.03.
I even asked Mario and Jack to just answer with a nod as to whether Sigma shareholders could attend the evening Chemist Warehouse meeting as observers and behave just like them by sitting quietly and saying nothing. Jack shook his head and muttered that it was “a shareholders’ meeting”.
If you believe the press, Chemist Warehouse opted for what’s called a back-door listing, which involves a much larger private entity merging with a smaller existing listed company.
Sigma, which is primarily a pharmacy wholesaler but also owns retail pharmacy brands such as Amcal, agreed to pay $700 million in cash to Chemist Warehouse shareholders and then issue a truckload of shares, such that Sigma investors would only own 14.25% of the combined entity.
Alas, ASIC and the ASX did a good job forcing Chemist Warehouse to disclose far more information than it expected, including a cracking December half-year result on Tuesday, which sent the Sigma share pricing soaring 12% to record highs.
All up, investors loved what they saw about the Chemist Warehouse juggernaut, sending the Sigma share price soaring from 76c on the day the merger was announced, in December 2023, to last night’s record close of $3.03, which valued Sigma at $4.94 billion and the combined business at a staggering $34.7 billion.
Surely, with this embarrassment of Chemist Warehouse riches, it will be harder now for the state and federal governments to continue to limit competition by banning supermarkets from offering in-store pharmacies.
If the stock holds at this level, Chemist Warehouse is effectively paying $4.2 billion for Sigma, when it could have bought it for less than $1.5 billion on the open market. Though the ACCC might have been a little tougher on a straight hostile takeover than the surprisingly agreeable position it took on the back-door listing proposal.
I thanked the billionaires for gifting us Sigma shareholders a collective $3 billion in value yesterday, and CEO Mario Verrocchi smiled, giving his Chemist Warehouse chair and co-founder Jack Gance a little pat on the leg.
The hottest governance issue going forward will be the vast array of related party transactions to be managed.
Seeing as no-one was offering up any answers yesterday, I offered up some free advice: disclose in the next annual report the specific Chemist Warehouse outlets owned privately by the founders that will generate $32 million in annual lease payments from the public company, and also give up the practice of Chemist Warehouse or any of its individual billionaire founders taking equity positions in specific suppliers, something they’ve done regularly in the past.
The three Chemist Warehouse founders have agreed to lock up 90% of their combined 48.34% stake in the combined company until August 2026 and won’t be able to sell the first 10% of their combined shares until the full-year results are released in August 2025.
However, the other 308 Chemist Warehouse shareholders (many of whom are franchisees) will collectively own about $12.5 billion worth of Sigma shares, or 36% in total. They are free to sell once they are issued the new Sigma shares on February 12.
Incredibly, 53 separate Chemist Warehouse shareholders own shares worth more than $50 million.
Macquarie Group is known as the Millionaires Factory, but it has not produced a single billionaire — unlike the six at Chemist Warehouse, namely the three Gance chaps who were in the pokies house last night, CEO Mario Verrocchi and his two younger brothers, Adrian and Marcello, who are both also pharmacists and will individually own about $1 billion worth of Sigma stock once the deal completes.
Nice work if you can get it!
