Eight-year quest to float Chemist Warehouse ends abruptly

Rothschild could do all the background work – just as it had with QR National-Aurizon’s $4.6 billion IPO in 2010 – but would require a big syndicate of lead managers to execute the transaction.

So, the big investment banking teams only stepped up their efforts, keeping close to the company as it made structural and regulatory changes and cleared hurdles required to make it on to the ASX.

Offshore investment bank bosses knew only a few things about Australia’s IPOs, and Chemist Warehouse’s potential to list was one of them. It would be a globally significant deal.

Eight years later, Chemist Warehouse is coming to the ASX, but not as first intended. It will backdoor list into one of its suppliers, Sigma Healthcare, in a deal that will value it at about $8 billion due to be announced in the next few days.

The purchase will be settled in scrip – a huge number of Sigma shares to Chemist Warehouse’s owners including the Gance and Verrocchi families and their franchisees. The listing, even if it is via Sigma, is good news for the ASX, which has been in talks with the companies and their advisers about the mooted deal’s structure for months.

The only dollars of equity raised will be about $350 million via Goldman Sachs, to help fund the enlarged Sigma. A multi-billion dollar IPO of global significance turned into a few hundred million dollar raising.

That is a big miss for investment banks. Every equity capital markets consumer sector banker and local investment banking boss worth their salt chased it for nearly a decade; this was big enough for about a $100 million-odd pile of fees and more about status and pride inside the dealmaking fishbowl.

Bankers had heard the rumours for months, saw Sigma getting close again to Chemist Warehouse, knew one of their own (David Di Pilla, a former managing director at UBS) had fingers in pies on both sides, and knew the IPO market was blocked. They also knew Chemist Warehouse’s owners wanted a big valuation, and saw it all coming. But there was still some crying into beers on Wednesday night.

The good thing about bankers, and particularly ECM bankers who chase flashing lights all-day long non-stop, is they do not stay down for long.

They can now finally scrub Chemist Warehouse off the IPO watchlist, at a time of year when it is all about 2024 pipeline.

And they can scrub it off knowing that yes, they missed the deal, but none of their rivals got it either. Goldman Sachs has a piece, but it is not the big flashy IPO piece accompanied by a global roadshow and gloating tour and a year’s worth of work.

Because investment banking is as much about what you don’t do, as what you do. When misses seem to attract more attention than wins, missing something like Chemist Warehouse is a career limiting move.

But when the whole street misses it, play on.