DISCOUNT DRUG STORES' $27M DEAL

Written on the 8 September 2014

DISCOUNT DRUG STORES' $27M DEAL DISCOUNT Drug Stores has been acquired by a Melbourne-based public company for $26.7 million.

Sigma Pharmaceuticals (ASX: SIP) has acquired the company through its subsidiary Central Healthcare Services.

The 121 Discount Drug Store pharmacies will keep their branding following SIP’s acquisition and will continue to operate out of a Brisbane head office.

Discount Drug Stores executive director John Clark (pictured) says the deal aligns with the Brisbane company’s goal of being a top three Australian pharmacy brand.

“Our team at Discount Drug Stores are passionate and committed to delivering exemplary customer service and to growing the DDS brand,” says Clark.

“We have a goal of being in the top three retail pharmacy brands in Australia, and identified Sigma as a natural partner to help achieve that goal.

“This is an exciting opportunity.”

Sigma CEO and managing director Mark Hooper says the acquisition fits well within his company’s CHS subsidiary, which was acquired in March for $24.5 million and operates as a standalone business.

The acquisition will be funded from existing cash resources.

“Discount Drug Stores is a natural fit with Sigma that broadens our customer profile and complements our existing pharmacy offer,” says Hooper, in reference to SIP’s 300 branded pharmacy members including Amcal, Pharmasave and Chemist King.

“When combined with our brands in Amcal, Amcal Max, Guardian, Pharmasave and Chemist King, along with our recently announced 10-year wholesale and service agreement with Pharmacy Alliance, Sigma now has a broad and extensive suite of options to support all pharmacists.”

The purchase of Discount Drug Stores will help drive a projected $400 million in new sales revenue to SIP and generate $8 to $10 million incremental EBITDA in the first full year of operation.

The acquisition is immediately earnings accretive and is expected to be return on invested capital accretive in the first year of operations. 

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