Sigma Healthcare has entered into a proposed merger with Chemist Warehouse Group using Sigma Healthcare shares and $700m of cash for consideration. A new credit facility from ANZ Bank ((ANZ)) will be set up to help fund the transaction.

Upon merging, Chemist Warehouse Group will own 85.7% of shares and shareholders in Sigma the balance.

Management also announced an entitlement offer to raise $400m for increased working capital for the previously announced new supply contract with Chemist Warehouse Group and growth initiatives.

Morgans assumes the merger is successfully completed on July 31 next year, with six months contribution in FY25 and full contribution from FY26. The target rises to 85c from 83c. Add.

Sector: Health Care Equipment & Services.

Target price is $0.85.Current Price is $0.77. Difference: $0.09 - (brackets indicate current price is over target). If SIG meets the Morgans target it will return approximately 10% (excluding dividends, fees and charges - negative figures indicate an expected loss).

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