The Sigma Healthcare Ltd (ASX: SIG) share price is shooting higher on Tuesday morning.
At the time of writing, the ASX 200 healthcare stock has jumped 12% to a 52-week high of $1.62.
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Why is this ASX 200 healthcare stock surging?
Investors have been fighting to get hold of the pharmacy chain operator's shares today after it released an update on its potential merger with Chemist Warehouse.
The Australian Competition and Consumer Commission (ACCC) has been seeking market feedback on matters raised in the competition regulator's statement of issues in relation to the proposed merger.
These concerns include the potential harm to pharmacies currently supplied by Sigma and the potential for Chemist Warehouse to access these pharmacies' data in ways that damage competition.
Undertakings proposed
In response to these preliminary concerns, Sigma has offered a court-enforceable undertaking that would require it to do three key things.
The first one relates to franchisees. It said:
1. not prevent or hinder franchisees who entered into their franchising arrangements prior to 1 January 2024 from terminating their franchise agreements with Sigma, for a period of three years. Sigma will waive its right to recover contributions Sigma has made under its franchise agreements and future fees payable to Sigma if these franchisees choose to terminate their agreements.
The second undertaking involves the handling of confidential data and information. It explains:
2. place restrictions on the collection, use and disclosure of confidential data and information from Sigma wholesale customers and franchisees for a period of three years.
Finally, a third undertaking relates to the Commonwealth Government's Community Service Obligation. It adds:
3. remain a participating pharmaceutical wholesaler under the Commonwealth Government's Community Service Obligation (CSO) arrangements for at least five years. The CSO arrangements contain service standards and compliance requirements for wholesaling of prescription medicines to all pharmacies.
ACCC response
ACCC Chair Gina Cass-Gottlieb is now seeking feedback on these proposed undertakings. She said:
We are now seeking feedback from stakeholders on whether the draft undertaking offered by Sigma may be capable of addressing the competition concerns arising from its proposed acquisition of Chemist Warehouse. While the ACCC is publicly consulting on this undertaking, this should not be interpreted to mean that this or any other form of undertaking will ultimately be accepted by the ACCC.
Judging by its share price performance today, the market appears to believe that the ASX 200 healthcare stock's undertakings could be the key to getting a deal over the line.
