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One of Australia's largest pharmaceutical suppliers and retailers, Sigma Healthcare (ASX: SIG), is set to cut its debt substantially after executing final contracts to sell two distribution centres (DCs) in Kemps Creek, NSW and Berrinbal, QLD.
Through a sale process led by PWC's real estate advisory team, the original plan was to partially sell four DCs but instead the final transaction involves the full sale of the land and buildings for two sites to LOGOS.
The DCs will be leased back to Sigma under a 15-year agreement with with two five-year options to extend, with an annualised lease cost of approximately $8 million in the first year.
Sigma retains ownership of its newly constructed DC in Canning Vale in WA, as well as its upcoming DC currently under construction in Truganina, VIC.
"This is a great outcome for Sigma shareholders. Owning and managing the construction phase gave us control over the build and created value for shareholders," says Sigma CEO and managing director Mark Hooper (pictured).
"Owning and managing the construction phase gave us control over the build and created value for shareholders.
"By completing this transaction, we benefit from LOGOS as the owner and manager of our tenancies at Kemps Creek and Berrinba, while capturing the latent value that was not previously recognised on Sigma's balance sheet."
Settlement is expected later this month and proceeds from the sale will reduce net debt to below $100 million, putting Sigma in a great position according to Hooper.
"We have restructured our business to deliver a more efficient base, renewed our Distribution Centre Network to arguably be the best in the industry, and are well advanced in upgrading our entire IT infrastructure.
"At the same time, we have retained balance sheet strength and flexibility to drive the business forward."
The sale follows a recent changing of the guard for Sigma's chairmanship, when a rejection of the company's remuneration report at its AGM in May led to the departure of Brian Jamieson, who has been replaced by longstanding board member Ray Gunston.
"I am taking on this role with confidence that Sigma is now emerging with a strong and clear future," Gunston said at the time.
"The business is well led, and the decision to invest through the challenging cycle we were in has been critical in setting Sigma up for the next decade.
"From today's AGM, I note the vote against our Remuneration Report. I give a commitment, which I know Christine Bartlett also shares as the incoming Chair of the Remuneration Committee, to analyse the feedback that has been given and to identify areas for review."
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