Sigma Healthcare Limited (SIG) Earnings Call Transcript & Summary

Welcome, everyone. I am Michael Sammells and as Chairman of the Board of Sigma Healthcare Limited, I would like to welcome you to today's Extraordinary General Meeting, including those joining us online in this hybrid meeting. It is now past 2:00 p.m., the appointed time for the meeting, and I'm advised that the necessary quorum is present. I, therefore, formally declare the extraordinary general meeting of Sigma Healthcare open. I wish to begin by acknowledging the Wurundjeri people of the Kulin Nation, the traditional custodians of the land on where we are gathered today. We pay our respects to their elders, past, present and emerging. Sigma's proud history spans over 100 years, and our evolution has led us to the point of today's meeting to vote on necessary resolutions to support the merger with the Chemist Warehouse Group that will significantly transform our business and create the foundation for decades ahead. Voting in today's meeting will be conducted by a poll, and I now declare the poll open on today's items of business. All polls remain open until the conclusion of today's meeting. As we move through the items of business, I will respond to questions from shareholders and their representatives or proxy holders. As this is a hybrid meeting, we will provide opportunities for questions from those in the room and online. For those participating online, the instructions on how to ask a question are detailed in the online guide, which was provided to shareholders and is on the website. Before we proceed, I would like to introduce the members of the Sigma Board and Management who are present on stage today. Starting from your left, Annette Carey, Neville Mitchell, Kate Spargo, Chris Roberts, Vikesh Ramsunder, our Managing Director and Chief Executive Officer; and Kara McGowan, who is our General Counsel and Company Secretary. We are also joined by our senior executive team, who will be available to chat with shareholders at the conclusion of the meeting. In addition, we are joined by representatives from our share registrar, Link Market Services, as well as Andrea De Cian from Grant Thornton, who is available to respond to any specific questions in relation to the independent expert report. I would also like to welcome Mario Verrocchi, Jack Gance, Damien Gance and Danielle Di Pilla, who are the 4 Chemist Warehouse nominees proposed to join the Sigma Board. And I'd also like to acknowledge the presence of Sam Gance, one of the founders of Chemist Warehouse who is with us today. Before we move on to the formal resolutions for the meeting, I would like to cover a few matters relating to the proposed merger of Sigma and Chemist Warehouse by way of scheme of arrangement and the process that we've been through over the last 18 months to reach this point. Further information on the merger and formal resolutions is included in the Notice of Meeting, which was lodged with the ASX by Sigma on the 18th of December 2024. As I outlined at the start, shareholders are voting on what is the biggest transformational opportunity in the history of Sigma. It is also enormously transformational for the Chemist Warehouse Group, which as a privately owned company, has achieved consistently strong growth for decades from a business model that has captured the hearts and minds of consumers. Clearly, related party transactions are a material part of the Chemist Warehouse business. Our focus has been on ensuring these transactions are well understood and governed, as we acknowledge they are a feature of the Chemist Warehouse business. We had experts complete due diligence. We have put in place strong future governance structures and processes to cover existing and potential arrangements, and we included transparent disclosures in our publicly released documents. We also commissioned an independent expert's report to consider whether the regime is fair and reasonable. I will cover this more shortly. On the 11th of December 2023, we announced to shareholders the merger proposal, to be completed by way of a scheme of arrangement for consideration of $700 million cash, subject to any leakage adjustments, plus Sigma shares. Post implementation, on a fully diluted basis, the Chemist Warehouse shareholders will hold approximately 85.75% of the merged group and Sigma shareholders will hold approximately 14.25%. The proposal was subject to several conditions precedent, including ACCC and shareholder approval. In the event that Sigma shareholders approve various resolutions today, the scheme is approved by Chemist Warehouse Shareholders at their meeting this evening, and the parties satisfy the conditions precedent in the Merger Implementation Agreement. We will create a full-service wholesaler, distributor and retail pharmacy franchisor. Whilst this model already exists in Australia and internationally, it has the potential to accelerate our strategic direction by bringing together two complementary businesses with complementary core strengths and expertise to enhance our service offering to customers. Sigma has world-class distribution infrastructure and capability that is delivering best-in-class service to pharmacies across Australia every day. Chemist Warehouse has unparalleled pharmacy franchise and marketing know-how and expertise which will also help elevate our support for our Amcal and Discount Drug Store franchisees. Given the nature and value creation of the proposed transaction, Sigma Directors unanimously recommend that shareholders vote in favor of the resolutions. The advantages of the proposed merger are many and varied, with the potential to create significant value for Sigma shareholders, which is already evident in the share price accretion since announcement. The proposed merger will create a leading Australian retail pharmacy franchisor and a full-time, full-line pharmaceutical wholesaler and distributor with a wide range of growth opportunities, both within Australia and internationally. And the complementary nature of both businesses creates a unique opportunity to extract significant cost synergies from bringing the businesses together. Management estimates put the potential cost synergies at $60 million per year that could be realized by the fourth year post implementation. One-off costs to extract the enduring benefits is estimated at $75 million. Whilst the merits of the proposal are clear, it is worth noting that if for any reason the proposal does not proceed, the trading price of Sigma shares may fall in the near term. And finally, we acknowledge the extent of the related party transactions that currently exist, which are part of the Chemist Warehouse business and its evolution. I believe we have introduced a robust solution to govern and manage related party transactions moving forward. Importantly for shareholders, Grant Thornton, who we appointed as the Independent Expert to review certain of these transactions, have concluded that the existing related party arrangements and future related party dealings which required shareholder approval, are fair and reasonable to non-associated Sigma shareholders. I will speak more about this shortly. If the merger proceeds, Sigma and Chemist Warehouse have agreed on the composition of our proposed Board. Today, we are seeking your approval for the election onto the Sigma Board of Mr. Jack Gance, Mr. Mario Verrocchi, Mr. Damien Gance and Ms. Danielle Di Pilla. They will join existing Board members being myself as Chairman, Vikesh Ramsunder, who will be CEO and Managing Director of the merged group, Dr. Chris Roberts, Annette Carey and Neville Mitchell. Kara McGowan will continue as Company Secretary and General Counsel. From my perspective, I am confident we have a strong Board with the requisite mix of skills and expertise from both the Sigma and Chemist Warehouse sides of the business. Having said that, we are also conscious that the composition of the Board does not meet the diversity and inclusion ratios, or the independence ratios expected of an ASX-listed company, and this is something that we as a new Board will seek to address over time. The one change from Sigma’'s existing Board is the retirement of Kate Spargo following implementation of the transaction. Kate has been a Director of Sigma for more than 9 years and was Chair of the Nomination and Remuneration Committee. Kate has been a highly valued member of the Board and I want to thank Kate for her significant contributions to the Board and Sigma more broadly. As part of the preparation for the merger, the Board Committee composition has also been established, which is outlined on this slide. I think the committee construct and membership provides a good governance framework and mix of skills for our Board. Due to competition legal constraints, noting the two businesses currently operate separately and compete with each other, the proposed new Board has not yet been able to meet as a collective and consider certain matters. This includes specific matters as to future business and corporate structure, longer-term strategy, short-term growth opportunities, some governance matters and detailed transition planning. These, among other things, will all be a matter of priority after we officially merge. Importantly for shareholders, in recognition of the importance of governance over related party transactions, we have established a new Independent Board Committee for the anticipated types of related party transactions, which I will personally chair with Annette and Neville as members. I will provide more detail on this shortly. We have also established a new Risk, Compliance and Sustainability Committee which Chris Roberts will Chair. Post implementation, Chris, who was originally a HMC nominee Director to Sigma, will be considered an independent director as HMC’s shareholding will be below 1% of the merged group. Sigma will also continue to have an Audit Committee and Nomination and Remuneration Committee consistent with the current structure. With that background, I will now move on to the formal business of the meeting. Firstly, I will briefly outlined the procedures for today's meeting. Those attending in person will have received an admittance card at the time of registration. Yellow cards were issued to shareholders and proxy holders entitled to vote and ask questions. Blue cards are for those shareholders entitled to ask questions but not to vote. Red cards have been issued to visitors who are not entitled to speak or vote at the meeting. Those attending virtually may vote and ask questions online, I encourage you to review the online platform guide available on your screen. If you are participating virtually and did not submit a question before the meeting, you will be able to submit questions at any time during the meeting by registering as a shareholder or proxy holder and selecting the Ask a Question tab or by asking your question over the phone. I will request questions from attendees in the room first, followed by the phone and online questions. If you would like to ask a question in the room, please approach the microphone at the appropriate time and display your yellow or blue attendance card. When I call for questions, please state your name and organization you represent, and please keep questions courteous and concise. Questions may be merged if we receive multiple questions on one topic. If you are present in person, you will have a yellow voting card, which you will be asked to complete and hand to the registry staff at the appropriate time. I will advise you when it's time to complete your voting card. If you need assistance, please ask one of the registry staff. To cast your vote using the online platform, please click the Get a Voting Card button and follow the prompts. You may cast your live vote at any time during the meeting. I will give you a 5-minute warning before we close the online voting platform. You will see a red bar appear along the top of the online platform with a countdown timer of how long you have remaining to cast your vote. Proxy votes received prior to the meeting will be shown on the screen for each item of business to be voted on today. Resolutions 1, 2, 3, 9, 10 and 11 are subject to voting exclusions as outlined in the Notice of Meeting. To ensure the views of shareholders are considered, a poll will be conducted on all resolutions. Before we move on to the formalities, I thank those shareholders who submitted questions in advance of the meeting, which I will now address. One question related to whether we will face any problems adhering to the agreement with the ACCC. The ACCC engagement process was very extensive. And as part of that, Sigma provided certain undertakings covering, amongst other things, the protection of data, the ability for franchise brands customers to exit and Sigma committing to remain a CSO wholesaler. Since the undertakings were announced, a significant amount of work has already been completed to develop protocols and practices to help us meet the commitments assuming the merger is completed. We also received a question regarding what the name of the listed company will be, and what happens to your existing shares. On the name, there is no current intention to change this. The listed entity will remain at Sigma Healthcare. In respect of your shares in Sigma, there is no change to your holding. If you have 100 shares in Sigma today, you will have 100 shares in Sigma post-merger. What we will be doing is issuing new shares to the shareholders in Chemist Warehouse as part of the merger implementation. The other questions received related to lease liabilities and our future policy position on financial leverage. As we remain separate companies today, we have not yet been able to consider many future policy decisions for the merged group. This will be a matter for the new Board once the merger is approved by shareholders. I will now move on to the formalities. We have 11 resolutions for shareholders to vote on today, which are listed on the screen and in the Notice of Meeting. The first year resolutions relate to the merger more generally, recognizing that there will be a change in the scale and operations of the current business of Sigma. And should the merger proceed, new Sigma shares will be issued as part of the consideration for Chemist Warehouse shareholders under the Scheme of Arrangement. Resolution 3 is in relation to the existing related party arrangements and proposed future related party dealings. This is a detailed regime with underlying categories of activities to be approved by Sigma shareholders. The parties have worked constructively to ensure there is a robust governance framework in place to support the related party transactions that currently exist in the Chemist Warehouse business and those related party transactions that are likely to arise. Importantly, the Sigma independent expert's report comments on the fairness and reasonableness of the existing related party arrangements and the future related party dealings to the nonassociated Sigma shareholders. The Sigma independent expert has determined that these are both fair and reasonable to the nonassociated Sigma shareholders. Resolution 4 is a requested approval in relation to the provision of financial assistance under Section 260B(2) of the Corporations Act. The next 5 resolutions relate to the new Board construct, including the proposed appointment of the 4 Chemist Warehouse Directors, and the increase in the director fee pool size in recognition of the greater number of directors on the Board and significant increase in the size and complexity of the Sigma business. The final 2 resolutions relate to remuneration matters for an existing long-term equity scheme currently on foot that the Board has recommended vest and be exercised because of the merger. We will discuss each resolution in more detail at the relevant time. I will be voting those proxies left to my discretion as the chair in favor of all resolutions. Resolution 1, which appears on the screen and in the Notice of Meeting seeks Sigma shareholder approval to change the nature and scale of Sigma's activities as required and for the purposes of Listing Rule 11.1.2. This change will occur because of the transaction. Significant detail was provided in the Notice of Meeting. Resolution 1 is an ordinary resolution and, if passed, will take effect on and from implementation occurring. Are there any questions from the room in relation to this resolution? If so, could you please move to the microphone.

Chair, we have a question from Stephen Mayne.

When are you proposing to disclose the proxy position today?

The proxy position today will be disclosed post the scheme meeting once we have the results this evening.

Right. Because best practice is normally to disclose them with the formal addresses before the meeting or if not, before the debate so that shareholders can have an informed discussion if there have been any protest votes. So have there been any material votes against any of the Board's recommendations today?

I'm not aware of that at this stage, Mr. Mayne, but we'll be posting the results in the format required by the ASX listing rules.

And just my last question on this one. In terms of significant changes operationally going forward, for me, rebranding Amcal pharmacies at scale to Chemist Warehouse is probably the most obvious sort of operational change. Are there any constraints about doing that in terms of agreements with the Amcal franchisees, for instance?

Effectively, what you're observing is a change in the scale of our business by putting the businesses of Sigma and Chemist Warehouse together under the same roof line. We see a place for both Chemist Warehouse and the Amcal and DDS brands to coexist under that roof line. And so I think that the changes in the size and scale of the business, and there's nothing else that prevents us from walking down this path that I'm aware of.

So there's the Chemist Warehouse, [ right near ], and Amcal, there are no constraints on us rebranding the Amcal or closing it down in terms of the franchise agreements at those Amcal pharmacies in particular.

What I would say is that we support the Chemist Warehouse model, which is a bigger franchise model. We equally support the Amcal and DDS model, which is a smaller footprint model. Typically, the size of the real estate is a lot smaller. And we've also walked through a very detailed process with the ACCC that's made themselves comfortable over any competition issues that may have been considered on the way through. Do we have any other questions from the floor? Operator, are there any questions over the phone?

There are no questions on the phone line at this time.

Okay. Thank you. Gary, are there any online written questions?

[ No questions online ].

Thank you, Gary. I will now put up on the screen details of the votes received from shareholders prior to the meeting for this resolution. We thank shareholders for your support on this resolution. We now come to Resolution 2, which seeks the required Sigma shareholder approval for the proposed issue of new Sigma shares under the transaction for the purposes of Listing Rule 7.1. As outlined earlier and set out in the Notice of Meeting, this resolution is to approve the ability for Sigma to issue the number of Sigma shares that results in Chemist Warehouse shareholders in aggregate owning approximately 85.75% of Sigma on implementation of the transaction. Resolution 2 is an ordinary resolution and if passed will take effect on and from implementation occurring. Are there any questions from the room?

Chair, we have a question from Stephen Mayne.

So this is effectively going to be the largest placement in ASX history. Sort of $25 billion, $26 billion worth of shares being placed. I just want you to clarify once this all has gone through, so we'll have a full placement capacity going forward for the 15% over the following 12 months. So based on the current share price, we'd be able to do a placement of $4 billion, $4.5 billion worth of shares at the 15% of $31 billion. So is that correct that this clears us, and we get full placement capacity going forward, having approved this $25 billion placement effectively.

Theoretically, yes, if we needed to do so.

All right. So it's going to encourage you to consider using that capacity going forward? Because I think one of the big issues is going to be 36% of the company not constrained from selling. A lot of potential selling in a quite a chaotic manner. And I think if you were to do a placement, you could also facilitate some sell-downs as part of that placement and then with the placement proceeds, you could also get involved in buybacks, which would be another way at facilitating that unprecedented enormous potential sell-down that we're going to see from the non-constrained 36% holders of the company, the 308 of them. So I'd just encourage you to consider using the placement capacity, raising some capital at the best possible price, offering retailer share purchase plans as well in the same terms and then being active in things like buybacks to facilitate that very large transition from franchisee owner shareholders to index funds and public company investors.

Thank you, Mr. Mayne. I will note that. One of the things I will have to point out that the unique nature of the merger of [ Sigma ] and Chemist Warehouse and the Board is just the fact that this Board hasn't been able to meet for legal constraints to contemplate anything, those matters, including future capital needs and capital structure. So I hear what you say and the new Board will contemplate a whole range of matters, including future capital need and capital structure. Are there any other questions from the room? Are there any phone questions at all?

There are no questions on the phone line at this time.

Gary, are there any online written questions?

Yes, one question, which is along the similar line. So do you think the business is well capitalized for future growth?

I think what we have is a business that is financially very strong and secure. I can't answer the future growth question because, quite frankly, we've provided a significant body of information about the Chemist Business Warehouse business today, the Sigma business as well. And as for what the future looks like and capital needs will be a matter for the business on a look-forward basis post implementation. Any other questions at all, Gary?

No further questions.

Okay. Thank you. I will now put on the screen details of the votes received from shareholders prior to the meeting for this resolution. We thank shareholders for your support on this resolution. We now come to resolution #3 on the Notice of Meeting in respect of the existing related party arrangements and future related party dealings. Shareholder approval of this resolution is a condition precedent for the transaction to proceed and is an important feature of this transaction. Given the critical nature of this, I want to take some time to explain to you the process we've been through and provide an overview of the governance practices we have put in place. Importantly, the independent expert has concluded that the existing related party arrangements and future related party dealings are fair and reasonable to nonassociated Sigma shareholders. The Related Party Governance Framework has been developed to establish a clear operating model moving forward to manage and govern existing and future related party transactions. The key components of the related party governance framework include: Firstly, the establishment of an Independent Board Committee to oversee these related party arrangements going forward. I will personally chair the IBC and will be joined by Annette and Neville, who are both independent nonexecutive directors. And secondly, the establishment of a related party working group consisting of independent senior management of Sigma to manage the ongoing related party arrangements on a day-to-day basis. At or before the 6th AGM of Sigma Shareholders, it is expected that shareholders will be asked to reapprove the ability for Sigma to enter into future related party dealings provided they are consistent with the related party governance framework or another framework under which related party arrangements may be entered into renewed or amended without requiring further Sigma shareholder approval and future related party dealings under it. At this time, another independent expert report will be provided. To guide the decision-making processes, the Sigma Board, the IBC and the working group are bound to consider the following 3 principles as set out and agreed in the Related Party Manual. Firstly, that a future related party dealing must be in the best interest of Sigma shareholders as a whole. Secondly, that a related party dealing must be on terms that would be reasonable in the circumstances if Sigma and the related party were dealing at arm's length or less favorable to the related party. And thirdly, without limiting Principle 2, a future related party dealing must be substantively on the same terms as an equivalent arrangement with a third party who was not a related party or on terms more favorable overall to Sigma. Equally important for shareholders, the Sigma appointed independent expert report assess the construct of the related party governance framework that has been established and considered it to be effectively designed and strike an appropriate balance between prescribed requirements in relation to commercial factors and guidelines to govern the spirit and substance. The full independent experts report is contained within the Notice of Meeting and Andrea De Cian from Grant Thornton is available today to respond to any specific questions relating to this matter. Hopefully, that overview and the significant amount of detail included within the Notice of Meeting demonstrates the strong governance overlay at both Sigma and Chemist Warehouse have implemented to address this matter. Before we move to questions, I just reinforce that resolution 3 is a single resolution, which covers all existing related party arrangements and future-related party dealings of all the related parties. The existing related party arrangements and future related party dealings each include different categories of related party arrangements, each comprising a number of arrangements. As a consequence, if resolution 3 is passed, it will constitute shareholder approval for the purposes of Listing Rule 10.1 in respect of all existing related party arrangements and future related party dealings of all the related parties. Are there any questions for myself or the independent expert in relation to this matter. Firstly, anyone from the room?

Chair, we have a question from Stephen Mayne.

Chair with ASX or ASIC more influential in proposing this course today? Which of those 2 were the most influential because it's a good outcome. I'm just curious as to which was most influential in given year?

Our team has dealt with both and both are comfortable.

Okay. I'm wondering if the committee members can just briefly provide any history they've previously had in managing large-scale related party transactions.

I'll speak on behalf of the committee. The short answer is not at this magnitude. It's rare, and it's unusual. But the approach we have taken to related party transactions all the way through is the fact that this is the very foundation of the Chemist Warehouse business has grown up through this. The dealings are material. We've had a range of presentations from Chemist Warehouse Representatives direct to the Sigma Board. We've had an expert team conduct due diligence and we've had an independent expert report. So our approach has been to make sure we understand the nature of the related party dealings. And having understood that what we put in place is an appropriate set of governance such that the conflicted parties aren't part of the decision-making process. So given the experience of the independent directors on the Board, I'm not sure it's necessary to have deep experience in this matter before because it's quite a routine governance matter, but the scale of it is different, if that makes sense.

Obviously, the $32 million in rent being paid to the 2 founding families for access to property they own is a big one. Just wondering if you can undertake to actually improve the disclosure on that in the next annual report and actually list the relevant properties, don't just provide an overarching financial disclosure, but actually detail these particular Chemist Warehouse outlets and even the terms ideally. Because I mean $32 million is a large number, and there's not a lot of visibility as to which particular properties are involved in those material related party transactions.

Okay. What I'd say to you is certainly the independent Board committee will be all over this as a subject manner, but the nature of future disclosures as an issue for a Board that has not met yet. So the Board will have a look at that on a range of things.

And just a final question. I appreciate that it's difficult with the Board not having met yet. So -- but do you personally have any particular related party transactions that you just having looked at a without having met with the rest of the directors that you personally like to see managed away over time? I'll give you my one suggestion. The one area I'd like to see to not do any more is for founders or insiders to have equity positions in suppliers. I think in terms of the trust of suppliers and people feeling that there's fair dealing, you're at such a scale now that I think entering into new supply arrangements where Mr. Verrocchi, one of the Gance family, has got 10%, and I just think that's going to be very untidy. And probably it's not going to be worth the upside given the scale of a $31 million business. So I'd encourage you as Chair of the Related Party Committee to try and manage those supplier equity related party transactions away as best you can over the period ahead.

I hear the question, and thank you for it. We will keep that in mind. I don't have a view about what is right and what is wrong, and we've really taken the approach of understanding what exists and putting a strong governance framework around anything that might come our way in the future to make sure that any such arrangements remain in the best interest of all shareholders, not just the related parties. And I have no doubt that the related parties have the same view. Are there any questions from the phone?

There are no questions on the phone line at this time.

Thank you. Gary, any questions online?

No questions online.

Okay. Thank you. I will now put on the screen details of the votes received from shareholders prior to the meeting for this resolution. We thank shareholders for your support on this resolution. Resolution 4 seeks approval of the Sigma shareholders pursuant to Section 260B(2) of the Corporations Act for financial assistance, which is to be provided by some or all of the Chemist Warehouse Group members as part of their integration into the merged group's financing arrangements. This is a detailed resolution which appears on your screen and in the Notice of Meeting and approval is sought by special resolution, which requires at least 75% of votes that are cast on the resolution to be in favor of the resolution. If passed, the proposed resolution will take effect on and from implementation occurring. Are there any questions from the room? There are no questions from the room on this. Are there any questions on the phone?

There are no questions on the phone line at this time.

Gary, are there any online questions?

No questions online.

Okay. Thank you, Gary. I will now put on the screen details of the votes received from shareholders prior to the meeting for this resolution. We thank shareholders for your support on this resolution. The next 4 resolutions relate to the appointment of new directors to the Sigma Board. Each resolution is an ordinary resolution, and if passed will take effect on and from implementation occurring. The background and experience of each nominated director was set out in the Notice of Meeting. And as Chair of Sigma, I think each proposed director will bring significant experience and skills that will be valuable to our business and shareholders. These proposed appointments will help form the Board for the merged group. As I outlined earlier, we are conscious of the need to address diversity and independents, which we will seek to evolve and refine over time. Resolution 5 seeks approval for the election of Mr. Jack Gance as a Sigma Director with effect from implementation of the transaction. Jack has extensive pharmacy and retail experience. He's a qualified pharmacist who opened his first pharmacy in Reservoir, Victoria with Sam Gance in 1972. In 1997, Jack, Sam and Mario Verrocchi established the My Chemist brand and in 2000 cofounded Chemist Warehouse. Jack is currently Chair of Chemist Warehouse Group. All Sigma directors have voted in favor of the resolution. I now move that Jack Gance be elected as a Director of the company. Are there any questions from the room?

Chair, we have a question from Stephen Mayne.

So Chair, best practice normally when candidates for election is that they'll do a brief stump speech. I'll encourage Jack and the other candidates to embrace that concept on the fly, if that's not too much to ask it. And I've got a question, obviously, candidate should answer question. So first question for Jack is, why has he chosen to go for the non-exec position as opposed to an exec director position and given that the other 3 nominees are all taking the exec roles. And why was it -- Jack, who was the nominee of his generation of the family as opposed to Sam?

So the first thing I'd say, normally, in a normal circumstance, Mr. Mayne, directors would probably already be on the stage seeking either their first election or reelection. The Chemist Warehouse gentleman aren't actually officers of the Sigma until this transaction completes since they won't be talking today. In terms of the Board composition, as a general answer to your question, the composition and roles of the Board were effectively the outcome of a negotiation with Chemist Warehouse. So I would invite you to accept the arrangements that are proposed. And I think the skills and experience of all 4 individuals of the Board is obviously very self-evident given the amazing business that they have founded and created. So you'll get plenty of opportunity at future AGMs to ask questions direct to all directors on the assumption that this transaction completes, but not today.

All right. So we won't be hearing from any of the candidates. Could you comment as to whether the 4 nominees that they put up today that was simply their proposal? Or was that -- did you negotiate for instance, that it couldn't be for executive directors because 4 executive directors is a lot with the cash and 5 would be a majority. So was that a negotiation? And did you have any input into the personnel they were proposing, or was that entirely at their discretion, and you simply had to accept who they were putting up?

I'd say to you that the size of the Board and the composition of the Board between independent and nonindependent directors was an agreed negotiation, the membership of the Board from either side was a decision for both of those Boards.

Okay. And I was really pleased to see the 3 founders lock themselves up for 90% of their combined 48% holding until August 2026. But I was a bit curious why Damien wasn't caught or wasn't included in that. Is there any explanation he's an executive director, son of a founder, why wouldn't you include Damien's holding as well in that broader Gance family commitment not to sell?

I think given the quantum of the shareholding of the founding directors what's been escrowed, one demonstrates their absolute commitment to the merged company, and I think that was more than sufficient. Are there any more questions from the room? Are there any questions from the phone?

No questions online.

There are no questions on the phone at this time.

It's okay. Perfect. Okay. I'll now put on the screen details of the votes received from shareholders prior to the meeting for this resolution. We thank shareholders who are supporting this resolution, and I welcome Jack to the Board. Resolution 5 seeks approval for the election of Mr. Mario Verrocchi as a Sigma Director with effect from implementation of the transaction. Mario is a qualified pharmacist who joined Jack and Sam's Pharmacy Group in 1982. Mario, Jack and Sam jointly established the My Chemist brand in 1997 and subsequently created Chemist Warehouse in 2000. Mario is currently Chief Executive Officer of Chemist Warehouse. All segment directors have voted in favor of the resolution. I now move that Mario Verrocchi be elected as a director of the company. Are there any questions from the room?

Chair, we have a question from Stephen Mayne.

I know Mario is probably determined not to speak, but I was wondering if you can maybe give us a nod. Is it okay if Sigma shareholders attend tonight's Chemist Warehouse Scheme meeting at the Olympic pokies Hotel in Preston at 6:00 p.m., just as they are today as nonspeaking observers.

I'm not going to ask...

I'm actually [ looking for a nod from the candidate ]...

No, I'm not asking Mario to nod or to do anything. It's not a subject matter for me. If you would like to ask that question at the conclusion is meant to various people, you're entitled to do so.

Okay. All right. Now I'd like to hear from Vikesh on this resolution because it's unusual, obviously, to have a CEO of a public company, do a merger transaction, remain the CEO and then have a founder, come on the Board as an executive director, sit around the table with circa 20% of the company and big personality, big history, amazing performance. How has Vikesh managed the relationship with Mario? What's his perspective on how they're going to work together? I mean I presume you've been having some discussions outside of the Board not being able to formally meet. But what are your feelings about having Mario sitting beside you as an executive director and reporting to you?

Can you hear me? There you go. Actually, I'm looking forward to it. If I consider Mario's, I guess, expertise and experience that he has and in what he's created in the country and combining that with my experience having run a listed entity, I think the combination actually can be very good for the future organization. So I have no reservations around it.

Thank you, Vikesh. Are there any further questions from the room? Are there any questions from the phone?