CFR Buys Big in Colombia

CFR Pharmaceuticals has agreed to acquire Colombia’s Laboratorio Franco Colombiano (Lafrancol), it says, in a $562m buy that is uncharacteristically large for the expanding Chilean, and makes it the largest pharmaceuticals company in Colombia. The deal, to be funded with cash and an unspecified amount of debt, is another example of dominant Chilean players expanding across the Andes, with CFR already claiming the position as the largest pharmaceutical company in Chile and Peru. “This acquisition is very significant, and we believe is the last one for CFR’s expected inorganic expansion plan. The acquisition is actually the largest one in the history of Latin America in the pharmaceutical industry. The Colombian market is huge, with more than 48m people, and Lafrancol is the largest laboratory in the country,” Javier Gunther, equity analyst at IMTrust, tells LatinFinance. CFR had been making smaller buys, but a larger one was expected given what the company said about its plans at the time of last year’s IPO, Gunther says. The transaction represents 2.8x EV/revenue, according to a person familiar with the transaction, based on about $200m in annual revenue, noting that the multiple is in line with recent deals in LatAm. Multiples have gone up in the sector, says the person, but that makes sense given the growth opportunities. In the case of CFR, its purchase brings cost and revenue synergies and expands beyond CFR’s previously small Colombia footprint. Higher multiples also mean families likely give more consideration to selling their businesses. He expects continued consolidation in LatAm as larger pharmaceutical companies continue seek growth in fragmented markets. The sale is expected to close before the end of the year, pending regulatory approvals. CFR was advised by Deutsche Bank and law firm Honorato, Russi & Eguiguren, and Lafrancol was advised by Estrategias Corporativas and law firm Brigard & Urrutia. CFR raised $368m-equivalent in an IPO last year, and last