Mexico’s Saba Buys Into Chile

Mexican pharmacy chain and distributor Grupo Casa Saba is acquiring Chilean drugstore operator Farmacias Ahumada (Fasa) in a deal valued at $637m which the buyer says makes it the leading LatAm drugstore. The deal prices each Fasa share at CLP1,642 and includes the assumption of about $162m in debt. Saba will finance it through a mix of cash and new debt, and is also planning to offer an all cash option tender for 100% of Fasa’s common shares at the same price, contingent on securing at least 51%. HSBC, which also advised the buyer, extended a 1-year bridge to Saba through its Mexican unit for the equivalent of just over $200m. A Chile-based equity analyst covering retail says the buy makes sense because Fasa had already entered Mexico in 2008 via the acquisition of Benavides, which has more than 500 stores in Mexico. Saba, meanwhile, has 160 drugstores under the Farmacias ABC brand in Mexico and 96 in the Brazilian states of Rio and Sao Paulo. Fasa also has stores in Peru, which gives Saba another new market. The buyer claims it will be among the largest distributors of consumer and pharmaceutical products in the region, with estimated pro-forma revenues of approximately $4bn and about 1,500 outlets through Mexico, Brazil, Chile and Peru. Chile-based analysts speculate that the founder was keen to sell following allegations of collusion with other large pharmacy chains to fix prices. According to the Chilean press, Fasa paid a fine of about $1m. Fasa shares gained 1.21% May 18, closing at CLP1,670. Fasa’s financial advisors on the M&A are Goldman Sachs and Servicios Financieros Altis. Estructura Partners/Cicerone also advised Saba, which claimed $2.2bn in sales last year. Fasa is controlled by founder Jose Codner and had $1.65bn sales in 2009.