EMS said it did not expect antitrust regulators to impose restrictions on the merger.
Brazilian pharmaceutical company EMS has offered to join forces with rival Hypera to create the country's biggest drug manufacturer, they said on Monday.
In a securities filing, Hypera said its board will assess the offer, including the hiring of external advisors. The merger could be confirmed within 30 days, EMS said.
Hypera shares closed up nearly 2%, rebounding from a drop of as much as 17% before the news.
Privately owned EMS proposed buying up to 20% of Hypera shares, valuing them at 30 reais each, along with a stock swap. The offer represents a nearly 17% premium over the stock's closing price from Friday. According to Valor International, the remaining shares would be exchanged for EMS shares, in a deal that would grant EMS control of at least 60% of the combined entity, with the possibility of exceeding 70%, depending on the level of participation in the tender offer.
EMS said the companies operate in similar markets and each reported about $1.4 billion in net revenue in the 12 months through June, but noted that their main business priorities diverge.
Hypera focuses on over-the-counter medications, while EMS's main business is generic drugs. In the proposal, EMS said it did not expect antitrust regulators to impose restrictions on the merger.
The leadership of both Hypera and EMS agrees that the industrial combination is undeniably beneficial, as it would solidify their position as market leaders with a 17% market share—more than double that of the second-largest competitor, Eurofarma, across prescription drugs, generics, and hospital segments. The companies also boast a portfolio of well-known brands, including Buscopan, Benegrip, Neosaldina, and Engov.
The discussions between the companies’ leaders have already covered various potential synergies, including negotiations with retailers, optimization of sales representatives visiting doctors, manufacturing improvements, complementary research and development efforts, and joint purchasing of raw materials and packaging, in addition to logistics efficiencies.
In previous years, EMS and Hypera’s owners advanced discussions about a potential business combination in 2022, as Pipeline reported at the time, but disagreements over the share exchange ratio stalled the deal. Júnior and the Mexican investors were reluctant to cede more than 50% of the company’s capital to Mr. Sanchez, and negotiations cooled. Since then, EMS has continued to grow and maintain profitability, while Hypera has struggled, losing R$10 billion ($1,7 billion) in market capitalization and now being valued at R$13.9 billion ($2,4 billion). Earlier this year, the two parties resumed negotiations.
Sources: Reuters, Valor International
