Sigma Healthcare Surges 28% After the ACCC Approves Merger

The $8.8 billion dollar merger between Sigma Healthcare and Chemist Warehouse is poised to reshape the Australian pharmacy landscape, consolidating power in the hands of two industry giants. But what does this mean for Australians—greater access to cheaper medicines or the loss of small, community-focused pharmacies? With Chemist Warehouse's retail dominance and Sigma’s extensive distribution network, this deal creates a pharmaceutical powerhouse that may leave small businesses gasping for air.

Investors have cheered the move—Sigma’s stock surged 28 per cent after the ACCC approved the merger with conditions. But the benefits to shareholders and consumers could come at a steep cost: the survival of small, independent pharmacies.

Is the Merger with Chemist Warehouse in Australia’s best interests?

Chemist Warehouse’s model of lower prices and large-scale operations has already placed significant pressure on smaller competitors. This merger amplifies that pressure, particularly in regional areas where small pharmacies provide essential, personalised services. For many of these businesses, competing against a combined Sigma-Chemist Warehouse behemoth may prove impossible.

The ACCC has attempted to strike a balance, implementing safeguards like allowing easier switching for pharmacies and limiting the use of customer data. While these measures aim to ensure fair competition, they may not be enough to counter the scale of the merged entity. Smaller pharmacies are unlikely to match the efficiencies and pricing power that come with such consolidation, leaving many vulnerable to being priced out of the market.

This dynamic reflects broader trends in Australian retail. Similar concerns arose during the Woolworths-Caltex partnership, where efficiency gains for the big players came at the expense of smaller service stations. The parallels suggest that even with regulatory oversight, smaller businesses often bear the brunt of such mergers, unable to compete on an uneven playing field.

As the pharmacy sector moves toward consolidation, Australians must grapple with what they value most—lower prices and convenience from large-scale operations or the survival of local businesses that deliver personalised care. If the Sigma-Chemist Warehouse merger sets the stage for an industry dominated by a few massive players, it’s worth asking if such consolidation is a price Australians are willing to pay.

What were the best and worst-performing sectors last week?

The best-performing sectors included Energy, up 4.32 per cent, followed by Utilities, up 4.29 per cent and Consumer Staples, up 1.95 per cent. The worst-performing sectors included Information Technology, down 2.94 per cent, followed by Real Estate, down 0.16 per cent and Consumer Discretionary down 0.15 per cent.

The best performing stocks in the ASX top 100 included A2 Milk, up 13.31 per cent, followed by Technology One, up 13.26 per cent and Northern Star Resources, up 12.93 per cent. The worst-performing stocks included Pilbara Minerals, down 17.41 per cent, followed by Wisetech Global, down 9.64 per cent, and IDP Education down 7.99 per cent.

What's next for the Australian stock market?

Last week, the All-Ordinaries Index hit a fresh all-time high, finishing with a gain of over 1 per cent. This strong performance reflects continued buyer confidence and a willingness to push prices higher. With December on the horizon—a month historically known for strong gains—seller activity may remain subdued, leaving room for the rally to extend further.

Against this backdrop, interestingly sector performance revealed a more nuanced story. Financials and materials turned in subdued results, limiting the broader market's upside. The materials sector, in particular, lags behind the financial sector, which has been the year’s standout performer. Yet, there’s a glimmer of hope in the energy sector, where early signs of a turnaround are emerging.

Last week, the ASX 200 Energy Index (XEJ) tested its September 24 low, a promising development. If the index builds on this strength and breaks through the 9,600-point level, it could confirm a significant bottom was established in September. Such a move would signal the potential for a prolonged bull run, offering exciting opportunities for energy stocks known for their capacity to deliver rapid gains.

As for the broader All Ords Index, its resilience is evident, but further short-term growth hinges on breaking the 8,700-point resistance. Failure to clear this level could lead to a more substantial pullback, particularly after the extended uptrend over the past year. In such a scenario, support around 8,300 points will be a critical level to monitor if selling pressure intensifies.

For now, good luck and good trading.

Dale Gillham is the Chief Analyst at Wealth Within and the international bestselling author of How to Beat the Managed Funds by 20%. He is also the author of the bestselling and award-winning book Accelerate Your Wealth—It’s Your Money, Your Choice, which is available in all good bookstores and online.