This is the first deal for Abbott since it split into two businesses
and spun off its blockbuster rheumatoid arthritis drug in a new
company, AbbVie Inc <ABBV.N>, last year and comes at a time when
health mergers have surged.
Abbott plans to focus the branded generics business on about 14 or
15 fast-growing countries in emerging markets.
"Not all geographies are alike and some are not particular focuses
for us," Chief Executive Officer Miles White said during a
conference call with investors. White said the company was still
looking at other transactions.
While the Latin American pharmaceuticals market has been attractive
to big drugmakers, there are few other big opportunities like CFR
because most companies are small, family-owned businesses.
The pharmaceutical retail and distribution industry does have some
larger companies, such as Mexico's Grupo Casa Saba <SAB.MX> and
Brazil's Hypermarcas <HYPE3.SA>. Earlier this month, Casa Saba sold
its Chilean health retail arm, Farmacias Ahumada, to Britain's
Alliance Boots for $638 million.
Abbott will buy about 73 percent of publicly traded CFR from a
holding company controlled by the Weinstein family, which founded
the company in the 1920s. It will conduct a tender offer for the
Chile's antitrust regulator, the so-called National Economic
Prosecutor's Office, said it will study the deal "to evaluate
possible anti-competition risks arising from the operation."
It said there was an overlap of various product lines sold in Chile
by both companies, but added that it could not calculate each
company's current market participation or the level of concentration
that would result from the operation without first gathering more
The move was a surprise to Latin American analysts, who were unaware
the company was in the midst of a sale. A few months ago its $1.2
billion bid for South Africa's Adcock Ingram <AIPJ.J> failed. <ID:
"This is very surprising," said Claudia Cavada, senior analyst with
Banchile Inversiones in Santiago. "It's a very good price compared
to yesterday's closing price."
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Abbott will pay 34.65 cents per share, or about 190.54 Chilean
CFR shares closed Thursday at 124.51 pesos and were trading at
around 181.5 Chilean pesos on Friday. Abbott stock dipped 0.6
percent to $39.00 in New York.
JPMorgan analyst Michael Weinstein said in a research note that the
move filled a hole while Abbott continues to weigh the sale of its
established products business in developed markets.
CFR Pharmaceuticals sells about 1,000 products across Latin America
and has 7,000 employees and research and development and
manufacturing facilities in Chile, Colombia, Peru and Argentina.
Abbott sells healthcare devices and branded generics in 150
countries and has 69,000 employees.
The purchase would add $900 million in sales in 2015. Abbott expects
the deal to close in the third quarter and to contribute to sales in
the fourth quarter.
Barclays <BARC.L> advised Abbott on the transaction and Deutsche
Bank Securities <DBKGn.DE> advised CFR Pharmaceuticals.
(549.90 Chilean pesos = $1)
(Additional reporting by Alexandra Ulmer, Rosalba O'Brien and
Anthony Esposito in Santiago and Esha Dey in Bangalore; Editing by
Jeffrey Benkoe, Sofina Mirza-Reid and Lisa Von Ahn)
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