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As outlined earlier in this review, the 2023 Australian IPO market has continued the general trend from 2022 of reduced activity both in terms of the number of IPOs and capital raised. This decline is due to ongoing challenging IPO market conditions in 2023, including because of high inflation, geopolitical risks, global interest rate increases and attendant uncertainties surrounding pricing and valuation of deals. With these factors having created perceived barriers to listing, enterprising issuers have embraced innovative approaches to reach the ASX boards, which also have the benefit of achieving other commercial objectives of the entity in addition to a listing. 

Two key case studies are Chemist Warehouse’s reverse takeover transaction with ASX-listed Sigma Healthcare and Light & Wonder’s foreign exempt listing. HSF is advising Chemist Warehouse on its transaction (which is ongoing) and also advised Light & Wonder.

Chemist Warehouse

Perhaps the most high-profile transaction involving an innovative listing route is Chemist Warehouse’s reverse takeover transaction with Sigma Healthcare. In this transaction, Sigma will acquire Chemist Warehouse via a scheme of arrangement in exchange for Sigma scrip and cash. This will result in existing Chemist Warehouse shareholders receiving approximately $700 million in cash and obtaining an 85.75% stake in the merged group. The transaction is expected to unlock significant synergies, and will create a leading healthcare wholesaler, distributor and retail pharmacy franchisor with an indicative market capitalisation of more than $8.8 billion. 

What is a reverse takeover?

In short, a reverse takeover (which may also be a ‘backdoor listing’ if the larger company is not listed) is a transaction where an acquirer makes a scrip offer to acquire shares in a larger company that results in the shareholders in the larger company becoming the majority holders in the acquirer. Where the acquirer is listed and the ‘target’ is not, this in effect enables the larger, unlisted target to become listed on ASX. 

Relative to a burst of activity in 2015-16, in which there were more than 100 reverse takeovers, in recent years the reverse takeover has become a relatively uncommon mechanism to achieve an ASX listing. Part of the reason for this may be that entities have realised that, unless there are other commercial benefits associated with the reverse takeover, the reverse takeover may not be justifiable as a means of listing because the entity still has to follow the usual IPO type listing process (in addition to the listed entity needing to obtain shareholder approval).

The rise in reverse takeovers in 2015-2016 was principally driven by amendments made to ASX Guidance Note 33, which came into effect on 1 January 2014, and clarified that ASX considered a 3 year period of continuous suspension “appropriate” before it would delist a dormant entity under Listing Rule 17.12.1  This change prompted many shell entities listed on ASX to actively seek out a transaction to avoid being delisted, resulting in a pull forward of reverse takeover activity which would have otherwise occurred in later years. 

This change, coupled with other listing rule amendments which made it more difficult to list smaller entities, have subsequently reduced the number of back door listings (which traditionally occur at the smaller end of the market). 

The novelty of the Chemist Warehouse transaction 

The Chemist Warehouse transaction is novel in that Chemist Warehouse is intending to come to the ASX boards as one of Australia’s largest private companies (as compared to smaller companies who usually undertake reverse takeovers) and it is undertaking the transaction with Sigma, a well-known healthcare company which had a market capitalisation of $787 million pre-announcement.

Consistent with their historically small size, reverse takeovers are typically structured as an offer of shares by the acquirer to the shareholders of the target as consideration for the target shares, with a share sale agreement entered into between them. By contrast to the typical targets in these transactions, Chemist Warehouse is an unlisted public company with more than 50 shareholders, with the result being that the transaction requires not only Sigma shareholder approval, but also Chemist Warehouse shareholder approval given the acquisition of Chemist Warehouse shares is regulated by the takeover rules in Chapter 6 of the Corporations Act (the transaction is to occur by way of scheme of arrangement under Part 5.1).

ASX confirmed that the transaction does not require Sigma to re-comply with ASX’s admission and quotation requirements pursuant to Listing Rule 11.1.3 (this is normally required in the case of back door listings). This was on the basis of certain conditions being met by Sigma, including Sigma providing sufficient disclosure to the market in relation to the transaction on announcement; Sigma and Chemist Warehouse having in place arrangements under which Chemist Warehouse must, in effect, ‘continuously disclose’ to Sigma information that Sigma requires to comply with ASX Listing Rule 3.1 (intended to ensure that the market does not trade on an uniformed basis if the market treats Sigma shares as a proxy for the combined Chemist Warehouse/Sigma group shares); and Sigma issuing a prospectus in connection with the transaction. It does, however, mean that Sigma is not required to satisfy the requirements in Chapters 1 and 2 of the Listing Rules as if it was applying for admission to the official list - for example Sigma is not required to re-satisfy ASX that it meets the profits or assets test or that it meets the free float and spread requirements. 

Aside from the commercial drivers of undertaking the transaction via a merger with Sigma rather than a standard IPO (such as the significant synergies on offer and complementary operations of the two businesses), there are other benefits that come from the transaction structure for Chemist Warehouse. For example, the presence of the Sigma shareholders on the register assists with obtaining free float for index inclusion. 

With the IPO markets difficult in 2023 as discussed above, the overwhelming positive response to the Chemist Warehouse / Sigma transaction (including the success of the Sigma entitlement offer and significant uptick in the Sigma share price post announcement), is a clear indicator that the market is nonetheless enthusiastic for and supportive of high-quality ECM transactions. We are hopeful that the transaction is just the medicine for the market that the doctor ordered!

Light & Wonder 

Formally known as Scientific Games, Light & Wonder is a leading cross-platform global games company headquartered in Las Vegas, Nevada, which 'is currently listed on NASDAQ. Following the acquisition of Crown Resorts by Blackstone in 2022, the ASX was left with reduced large-cap exposure to the gaming industry. Given the familiarity of Australian investors with the industry (in particular as a result of the ASX listing of Aristocrat Leisure) and historically high valuations afforded to gaming businesses on the ASX, Light & Wonder completed a foreign exempt listing of Chess-Depository Interests (CDIs) in May 2023, aiming to capitalise on demand from Australian investors and build a presence in one of its key markets.

As at the end of December 2023, there were only 48 foreign entities listed on ASX via a foreign exempt listing. However, of these 48 foreign entities, 38 are incorporated in New Zealand and were subject to lower assets/profits test to achieve their foreign exempt listing. While non-NZ foreign exempt listings are very uncommon in and of themselves, Light & Wonder’s approach to the Australian market was even more unique in the sense that it was a ‘compliance listing’ only, and did not involve an issuance of new shares or CDIs. This meant that it hit the ASX boards without needing to prepare or lodge an IPO prospectus, something which was aided by the fact Light & Wonder had not issued shares in the 12 months prior to listing (meaning the ‘on-sale’ provisions in Chapter 6D of the Corporations Act did not cause issues for the transaction structure).

Whilst Light & Wonder has not raised capital post listing, the possibility of obtaining relief so that it can rely on the ‘low doc’ regime for conducting a placement or rights issue, similar to relief obtained by other foreign exempt ASX listings where the home listing disclosure rules are sufficiently similar to the ASX’s disclosure rules, raises the prospect of companies with foreign exempt listings being able to raise capital on ASX without needing to lodge a prospectus with ASIC, and instead relying on the familiarity the market has with the entity from its listing on its home exchange and ASX.

The transaction has been a significant success for Light & Wonder, which started life on ASX with 1,000,000 CDIs on issue, an average trading volume in the first week of 26,144 CDIs per day, and the first CDI trade at $91 per CDI, to now, 9 months later with 15,538,557 CDIs on issue, an average trading volume of 89,968 CDIs per day in December 2023, and a closing price of $134.37 on 9 February 2024 (being a 47.6% increase in price per CDI since listing). It has achieved this while still retaining its primary NASDAQ listing, enabling it to keep the best of both worlds. 


As the Chemist Warehouse and Light & Wonder transactions demonstrate, novel strategies became an option for enterprising management teams and issuers seeking the benefits of an ASX listing in 2023. While the general expectation is for capital markets (and IPOs in particular) to rebound in 2024 (and we hope the success of transactions such as these assist!), the door is firmly open for others to take alternative routes to the ASX in appropriate circumstances. 

  1. From Monday, 3 February 2020, ASX’s policy is to remove entities whose securities have been suspended form quotation for a continuous period of 2 years, as set out in Guidance Note 33.

Turning tides:

Australian ECM Review 2023

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Ling Zhu

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Nick Gillies

Solicitor, Melbourne

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