Droga Raia, Drogasil Merge

Brazilian pharmacies Droga Raia and Drogasil agreed to merge Wednesday in a stock-for-stock transaction valued at BRL1.84bn ($1.18bn). Droga Raia shareholders will receive 2.29 Drogasil shares in exchange for every Droga Raia share, valuing the company at around 10.3x forward Ebitda, according to one Sao Paulo-based equity analyst, in-line with where it has been trading. Drogasil will remain a listed company and be renamed Raia Drogasil, with current Drograsil shareholder taking a 57% stake in the new company. The combined entity will have a 50.4% free float, while 47.7% will be held by the controlling shareholders of the two companies, including Gavea, Pragma and the Pipponzi, Pires and Galvao families. Analysts largely took a positive view of the deal. “It’s fairly valued in my opinion,” says Iago Whately, equity analyst with Fator, who notes it will create a leading retailer in Brazil. “I think it will be accretive for both companies,” says the first analyst, noting the potential for synergies between the two and the likelihood that the deal will help protect their combined market share.