Chile's CFR Pharmaceutical, which tried for months to buy South Africa's Adcock Ingram, will now be gobbled up itself. Abbott ($ABT), which last year spun off its drug development business into AbbVie ($ABBV), will boost its now limited drug portfolio with a deal to buy the South American company for about $3 billion.
The Chicago-area company said the acquisition will more than double its sales in the hot Latin market, adding $900 million to its revenues in its first full year in 2015 and providing double-digit sales growth over the next several years. It gets CFR's line up of more than 1,000 drugs,along with R&D and manufacturing facilities in Chile, Colombia, Peru and Argentina, and about 7,000 CFR employees. After spinning off AbbVie Jan. 1, 2013, Abbott was left with the generic drug business, along with medical devices and diagnostics and nutritional products.
To accomplish its aim, Abbott said it will buy the holding company that indirectly owns approximately 73% of CFR and then offer up cash for all outstanding shares. It expects those two steps to cost about $2.9 billion, and then it will assume another $430 million in debt.
Bloomberg says that while CFR is based in Santiago, Chile, its largest market is Colombia, where it gets about 30% of its revenue, then Chile at 21%, with Peru chipping in 16%. Drugmakers have flocked to Mexico, Central and South America in recent years as they have looked to compensate for revenues lost to generics and slow growth in Europe. With about $73 billion in drug sales now, the Latin America market is projected to grow to $124 billion in 2018, Bloomberg reports, citing IMS Health data.
But the market is not without its own perils. Sanofi ($SNY) found that out last year in Brazil when its Medley unit discounted and pre-sold products to try to beat an increase in the country's value added tax, then ended up having to take back a bunch of unsold products. Termed the "Brazil generics issue," the screw-up trimmed €0.17 a share off its second-quarter earnings, nearly as much as it lost to generic competition on two of its biggest drugs.
The Abbott, CFR deal comes amid a spate of M&A action, with Pfizer ($PFE) trying to buy AstraZeneca ($AZN) for $106 billion and Valeant ($VRX) trying to pick off Allergan ($AGN) for $47 billion. It comes just four months after CFR abandoned its own attempt to merge with Adcock Ingram in a $1.2 billion transaction. That effort was opposed by Adcocks's largest shareholder, which was not excited about the company being acquired by a foreign operation. Today's announcement also speaks to the dubious nature of deal rumors from anonymous sources. Abbott was recently rumored to be looking for buyers of its generic drug business.
- here's the announcement
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