Healthcare. A planned merger of Myer and Premier’s Apparel Brands and an effective backdoor listing on the Australian Securities Exchange of Chemist Warehouse through a merger with Sigma will be determined by extraordinary shareholder meetings. Shareholder’s speak With Solomon Lew in effective control of Premier Retail, and Chemist Warehouse having worked towards a listing on the stock exchange for more than five years, the crucial approvals of both merger proposals rest with Myer shareholders on January 23 and Sigma shareholders a week later on January 29. The Chemist Warehouse and Sigma merger looks to be a win-win for shareholders in both entities and a review of the proposal by the Australian Competition and Consumer Commission has determined it is not detrimental to consumers or independent pharmacies supplied by Sigma’s wholesale division. The merger was projected to be worth almost $9 billion but is likely to end up above that figure, creating a retail footprint of about 1000 outlets but also offering substantial growth opportunities expanding Sigma’s product development along with Chemist Warehouse growth plans in overseas markets. Sigma owns the retail pharmacy brands of Amcal, Guardian, PharmaSave and Discount Drug Stores, but supplies pharmaceutical products to more than 4000 pharmacies nationally from a network of nine distribution centres. Chemist Warehouse has had long-term supply contracts with Sigma. The merger unlocks value for Chemist Warehouse investors who provided Sigma shareholders approve the deal on January 28, will account for close to 86 per cent of the issued scrip in the merged entity. Chemist Warehouse nominees to the Sigma board of directors if the merger succeeds will be Jack Gance, Mario Verrocchi, Damien Gance and Danielle Di Pilla. The biggest hurdle for the pharmacy merger was the ACCC competition analysis given the intense scrutiny of Australia’s major retailers in the past 24 months and Chemist Warehouse being one of the top 10 retail companies. The ACCC verdict on the Chemist Warehouse merger plan seems to be that it is more likely to increase market competition than to reduce it. The merger is certain to shake up the pharmacy sector and is likely to be a popular stock with investors given the prominence of its brand, its category-killer business model and the synergies that will be extracted from the integrated businesses. All things considered, the January 29 extraordinary general meeting of Sigma Healthcare shareholders is not likely to generate any surprises. Not all plain sailing for Myer The proposed Myer and Premier merger is not as straightforward but would be expected to gain Myer shareholder approval given Solomon Lew, Premier Investments chairman, has built a strong foundational stake in the department store group and Myer directors and topline managers are keen. The January 23 Myer shareholder meeting may, however, not be all plain sailing though as the proposed merger is not without significant risks wedding two retail entities who have underperformed for some years. The proposed merger certainly seems to have benefits for Lew consolidating two of his major retail investments and resolving a succession question mark in the Premier apparel group. The value of the deal for institutional and retail shareholders is less certain given Myer has a dismal track record with its ownership of specialty chains. Premier’s two best-performed and growth brands of recent years, Smiggle and Peter Alexander, are not part of the merger plan requiring Myer to reinvigorate the Just Jeans, Portmans, Jacqui E, Dotti and Jay Jays brands. Olivia Wirth, Myer executive chair, is apparently confident that scale will make all the difference to the underperforming Myer Specialty Brands businesses Sass & Bide, Marcs and David Lawrence. Scale didn’t exactly work out all that well for Mosaic Brands. A strategic review of Myer Specialty Brands last year prompted Myer to appoint KPMG Corporate Finance to pursue a sale of the three brands, a process aborted by Wirth when she became executive chair in June 2024. The merger could potentially bolster Myer’s loyalty programs, generate sales growth with possible international opportunities online if not in bricks-and-mortar and add expertise in speciality retailing. No doubt it is also seen as an opportunity to quell speculation about Myer’s ownership and to extract synergy benefits to bolster a relatively modest bottom line. If the merger does proceed, it will lift Myer’s revenue from around $3.26 billion in the l2024 financial year to $4 billion or better if trading conditions improve. The proposal has been declared “fair and reasonable” by Kroll Australia, acting as independent experts, and is supported by Myer directors and enthusiastically championed by Wirth who describes it as transformational. Wirth claims the deal will give Myer a more powerful retail presence with around 780 department and speciality stores. She claims the merger will create an opportunity to leverage its Myer One loyalty scheme which added more than 700,000 new customers last financial year, crucially for the department store with 50 per cent of them under 35 years of age. However, there are clear risks associated with this merger given the trading results of Myer Specialty Brands and the Premier Apparel Brands over a number of years and heightened national and global competition in fashion. Ahead of Myer’s January 23 shareholder meeting to vote on the merger, Premier Investments was forced to issue a statement to curtail speculation about trading results for the entire Apparel Brands portfolio. The Australian newspaper published an article on December 16 last year that indicated sales and earnings of Smiggle and Peter Alexander have been tanking. The two brands are not included in the Myer deal and were to be spun off into a separate entity albeit the falling sales, highlighted by significant underperformance against budgets in the United Kingdom, could explain a delay in establishing the new venture. Premier advised investors to be cautious about relying on information that was “necessarily selective and incomplete and does not present a full financial picture of the group’s performance or position”. The Australian article was based on leaked documents that also painted a negative picture of sales in Australia and New Zealand for Apparel Brands that are included in the merger deal with Myer. Premier’s statement said The Australian article did not present a full financial picture of the group’s performance given the ongoing structural shift in retail shopping patterns. Shareholders at Premier’s annual meeting on December 13 last year were not provided with an update on sales which could have generated concern from Myer investors about the merger if they reflected declining results across the entire brand portfolio. While Premier may see an uplift from the key trading events of Christmas, Boxing Day/New Year sales and back-to-school, The Australian article derived from leaked data did include November and Black Friday sales. Wirth’s has had limited retail experience, joining the Myer board in 2023 after a career in tourism and transport jobs before working in marketing, customer service, corporate affairs the loyalty program for Qantas. Notwithstanding the Kroll Australia ‘fair and reasonable’ finding for the Myer-Premier Apparel Brands merger, the deal is tempting fate. Wirth is about to increase the incline of her already steep learning curve in retailing with a crucial question mark over whether or not there is a viable fit for speciality chains and the department store.