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April 13, 2016
The past few months have been exciting for Latin America and not only because of the beginning of the World Cup next month. Abbott Laboratories, the largest maker of heart stents and adult nutritional drinks joined in the recent deal making fashion of the healthcare industry by agreeing to acquire Chile’s CFR Pharmaceuticals SA for an impressive US$2.9 billion. Alliance Boots’ are also currently in negotiation looking to expand into the lucrative Latin American market by purchasing Mexico’s Farmacias Benavides and Chile’s Farmacias Ahumada.
Acquiring CFR Pharmaceuticals SA and its holding company, Kalo Pharma Internacional S.L., the US-based pharmaceuticalfirm Abbott Laboratories are set to enter the thriving Latin American market. CFR Pharmaceuticals SA is Chile’s biggest drug maker and is based in Chile’s capital of Santiago. Having built up its reputation over a number of years, the Chilean company sells a range of women’s health, heart and respiratory disease products across 15 markets in Latin America. Due to recent austerity measures of price controls and economic uncertainty in developed European markets, Abbott’s pharma business has been struggling as of late. However, this new move into Latin America looks set to be a plan of action to counter these effects.
Abbott’s recent acquisition comes on the back of a record month of April 2014 where about US$118 billion worth of healthcare mergers and acquisitions were announced or proposed. This figure alone is almost as much as the US$174 billion that was assigned to healthcare deals for the whole of 2013. Facing slower growth rates in the US and Europe, companies are moving into new markets such as Latin America which is growing up to three times faster than the developed market and is estimated to surge to US$124 billion by as early as 2018. Abbott looks set to reap the benefits with CFR’s largest markets being Colombia, followed by Chile and then Peru all of which are part of the new Pacific Alliance and have shown strong growth in comparison to their other South American neighbours.
Alliance Boots’ are probably looking at Abbott’s recent acquisition with envy as their lucrative Lain American market expansion plan could be in jeopardy following a dispute over the ownership of the Mexican Farmacias Benavides chain. Spending £375 million, Alliance Boots’ announced their expansion into the Latin American market by buying up Farmacias Benavides in Mexico and Farmacias Ahumada in Chile. However, unlike the smooth, trouble-free dealings of the Abbott and CFR takeover, the family controlling Farmacias Benavides is disputing who would at the end of the day own the pharmacy along with the holding company Casa Saba. The holding company, Casa Saba is a wholesale distributor primarily operating in Mexico and also controls Controladora Casa Saba which operates the Farmacias Ahumada and indirectly Farmacias Benavides. The issue lies within a family dispute over the will and distribution of wealth from the father of the family that died. One thing is for sure, the Farmacias Ahumada in Chile will be part of Alliance Boots having gained a 97.89% share in the business. In the coming days, all will be revealed if Alliance Boots get what they came for along with the chain of 1,400 stores throughout Mexico and Chile.
The continued growth of the Latin America pharmaceutical and medical market along with the favourable investment incentives put in place by Latin American governments is likely to continue to attract interest from larger companies outside of the region. Looking to capitalise on the well-established Latin American companies, firms from outside the region are likely to keep the brand name above the door for the early stages before making the switch to what could be household names for their North American neighbours. The wave of investment entering Latin America looks set to continue to build momentum and with the developed markets slowing, it would not come as a surprise to see companies battling it out to ride the wave to the very top through future mergers and acquisitions.
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