Brazilian Health Sector Growth Drives IPOs

Health insurer Grupo Qualicorp and drugstore chain Brazil Pharma have launched IPOs set to price this month, hoping that the Brazilian healthcare story will draw investors in what has been a tricky year for new issuance. “Both issuers are benefitting from rising incomes and the expansion of formal sector employment,” says a Sao Paulo-based equities analyst. He notes that Brazil Pharma in particular will be motivated by the success of Droga Raia’s BRL655m ($415m) IPO last year. With about 85% of the market, Qualicorp, the Brazilian health plan vendor controlled by PE firm Carlyle Group, is likely looking to raise more than BRL1bn for expansion to keep ahead of other entrants to the market, he says. Comps for Qualicorp are difficult to find, but listed dental insurer Odontoprev is a good starting point. Qualicorp has set a range of BRL16-BRL19 for the June 27 sale of 27.2m primary shares and 45.4m secondary shares. This would indicate a BRL1.46bn sale if the issue is sold at the BRL17.50 midpoint and a 15% greenshoe made up of both primary and secondary shares is included. A 20% hot issue is also available. The selling shareholders in the secondary portion include Carlyle and one company executive. The US firm, heard to be looking to increase liquidity at a time when selling US assets might be difficult, would see its stake drop to 39.7% from 68.4%, if the greenshoe is included. Founder Jose Seripieri would not sell any shares, but see his stake fall from 31.3% to 28.0%. Qualicorp plans to put 80% of the proceeds from the primary sale toward acquisitions in the health plan area, 15% to technical upgrades and 5% to general purposes. Qualicorp, founded in 1997, recorded Ebitda of BRL127.5m in 2010, up from BRL56.4m in 2009. Bank of America Merrill Lynch, Bradesco, Credit Suisse and Goldman Sachs are managing the sale. Brazil Pharma, meanwhile, is set to price June 22. The retail pharmaceutical operation run by BTG Pactual plans to sell 20m primary shares at BRL16.25-BRL