Sigma Enters Into New $500 Million Financing Agreement With Westpac Banking Corporation

  • Dec 17, 2018 AEDT
  • Team Kalkine
Sigma Enters Into New $500 Million Financing Agreement With Westpac Banking Corporation

Sigma Healthcare Limited (ASX: SIG) is an Australian health care group with the largest pharmacy network across Australia. SIG has a presence in the hospital pharmacy services and other healthcare services.

Today, the company announced a $500 million Receivables Purchase Agreement with Westpac Banking Corporation, the nation’s leading financial service provider. It will provide the company with significant additional funding options to continue its investment program and pursue future growth opportunities.

The new three-year re-financing agreement is split into three tranches:  

  • Cash advance tranche of $115m which will expire on 30 November 2019
  • An overdraft facility of $135m which will expire on 31 May 2020
  • Cash advance tranche of $250m which will expire on 30 November 2021

This facility will amortize in line with Sigma’s expected return of working capital from the exit of the My Chemist/Chemist Warehouse contract.

On 2 July 2018, SIG announced to end its supply agreement with the Chemist Warehouse Group by July 2019 freeing over $300 million in cash. This cash was expected to enable the company to expedite the execution of SIG’s strategy to diversify and strengthen their business. Chemist Warehouse Group is an Australian chain of retail pharmacies.

The facility provides the company with additional funding headroom and flexibility to meet its significant infrastructure investment in distribution centres and information systems, as well as ongoing working capital requirements. This new facility will further provide Sigma with a robust funding platform for the next stage of the Company's corporate transformation.

On 14 December 2018, Australian Pharmaceutical Industries Limited (API), a pharmaceutical company in Australia, announced to acquire all the shares in SIG via a scheme of agreement in which each SIG shareholder would receive 0.31 API shares in addition to $0.23 in cash. This equates to $0.686 for each SIG share at a premium of 69.3% to the closing price on 13 December 2018. Earlier, API had a 12.95% stake in SIG. SIG has appointed Goldman Sachs as its financial advisor.

Because of the announcement of the acquisition, the securities of SIG were placed in a trading halt on the same day. Although the share price surged from 40.5 cents on 13 December 2018 to 58 cents on 14 December 2018 showing a rise of 43.21%. The regular trading of securities commenced today with a dip in price by 1 cent. The scrip price is currently trading at 57 cents.

The scrip price has fallen by almost 42% this year with a significant dip in the price after the exit of the My Chemist/Chemist Warehouse contract. The price dipped by 40.12% on 2 July 2018. Over the last five trading sessions, the price has surged by 33.33%.

Company recently announced its half-yearly results for 2018 which stated its sales revenue went up by 3.2% to $1.8 billion (driven by growth in Sigma hospitals), and underlying EBITDA and NPAT down by 16.4% and 31.2% respectively (because of the high D&A and interest charges and additional rebates paid to MC/CW Group) with a ROIC of 13.6%.


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