Sigma Healthcare Ltd (ASX: SIG) shares have made their long-awaited return to the ASX boards on Wednesday.
And it certainly was worth the wait!
In morning trade, the pharmacy chain operator and distributor's shares are up 75% to $1.35.
What's going on with Sigma shares today?
Investors have been fighting to get hold of the company's shares this morning after responding positively to its proposed merger with Chemist Warehouse Group to form an $8.8 billion behemoth.
As we covered here this week, MergeCo, as it will be known in the interim period, will have aggregate annual historical earnings before interest and tax (EBIT) of over $495 million before synergies. This compares to Sigma's FY 2024 guidance for EBIT of $26 million to $31 million.
It will also have a larger and more diversified earnings base and the potential to deliver annual cost synergies of $60 million within four years. That's approximately double Sigma's entire EBIT for FY 2024.
Capital raising
To support the proposed merger, Sigma shares have been offline this week while the company sought to raise funds.
This morning, the Amcal owner revealed that it has successfully completed the institutional component of its $400 million fully underwritten 1 for 1.85 pro rata accelerated non-renounceable entitlement offer.
The institutional entitlement offer raised approximately $178 million and was strongly supported by existing eligible institutional shareholders. These funds were raised at 70 cents per new share, which represents an 8.2% discount to its last close price.
Sigma will now push ahead with the retail component of its capital raising, which aims to raise $223 million from shareholders at the same price. And given how Sigma shares are performing today, I don't think it will have any issues raising these funds!
Sigma's CEO, Vikesh Ramsunder, was pleased with the news. He said:
We are very pleased by the support demonstrated by existing and new institutional investors for the Entitlement Offer. The Entitlement Offer will fund increased working capital requirements and progress business growth initiatives including relaunching our Amcal and Discount Drug Store brands and expanding our private and exclusive label product range.
In the event the Proposed Merger proceeds to completion, and to the extent the proceeds have not been applied to fund working capital needs and new business initiatives, some of the net proceeds from the Entitlement Offer may instead be used to partially fund the cash consideration by Sigma under the Proposed Merger.
Overall, judging by the market's reaction today, it seems that investors are extremely supportive of the proposed merger and are eager to get a slice of Chemist Warehouse. They also appear confident that the deal will be completed successfully.
