Carlyle Group LP (CG) and KKR & Co. are among private-equity funds in talks to acquire Fleury SA (FLRY3), the worst-performing medical-services provider in Brazil last year, in a deal that may total more than 2.9 billion reais ($1.2 billion), according to three people familiar with the matter.
Gavea Investimentos Ltda. and Apax Partners LLP have also looked at Sao Paulo-based Fleury, three people said, asking not to be named because the talks are private. Gavea, JPMorgan Chase & Co. (JPM)’s Brazil private-equity and hedge-fund unit, owns a 30 percent stake in Instituto Hermes Pardini Ltda., which competes with Fleury in providing diagnostic services to the medical profession. Gavea isn’t large enough to take control of Fleury without partnering with another investor, four people said.
Fleury missed analysts’ earnings estimates for the 12 quarters through September as it seeks to cut costs amid increasing competition from laboratories and hospitals. Slower growth in the medical-diagnostic business and an inability to transfer higher costs to customers are risks to the industry, according to a Dec. 15 report by Votorantim Corretora de Titulos e Valores Mobiliarios Ltda.
Fleury said on Nov. 14 that its controlling shareholder, Core Participacoes, hired New York-based JPMorgan to “assess strategic alternatives related to its stake in the company, including a potential entry of new investors in Core,” according to a regulatory filing. Fleury declined to comment further on Core Participacoes or talks with potential acquirers. Officials at Hermes Pardini, Gavea, Apax, KKR and Carlyle also declined to comment.
Fleury’s adjusted net income was 18.3 million reais in the third quarter, down 30 percent from a year earlier and short of the average estimate of 28.6 million reais among analysts surveyed by Bloomberg.
Diagnosticos da America SA, Brazil’s biggest medical-diagnostics company by market value and Fleury’s main competitor, rallied the most in four years on Dec. 23 after the Barueri-based firm, known as Dasa, said its biggest individual investors offered to acquire all outstanding shares.
Edson de Godoy Bueno and his former wife, Dulce Pugliese de Godoy Bueno, own 23.6 percent of Dasa. They proposed buying at least an additional 26.4 percent plus one share, in an offer that could be extended to all 237.1 million outstanding common shares, according to a prospectus published in Valor Economico newspaper on Dec. 23.
Edson de Godoy Bueno founded Amil Participacoes SA, a health-insurance company and hospital chain. UnitedHealth Group Inc. said in October 2012 it would acquire 90 percent of Amil for about $4.9 billion. The de Godoy Buenos’s holding company, Cromossomo Participacoes II SA, offered to pay 15 reais per Dasa share, or as much as 3.56 billion reais.
Any acquirer of Fleury may be forced to take the company private. Under the company’s bylaws, stockholders are entitled to 100 percent of the price paid to controlling stakeholders if control changes hands. Core Participacoes owns a controlling stake of 41.23 percent.
Fleury has jumped 8.2 percent since Oct. 24, when Exame magazine reported the company was looking for a buyer, without saying how it got the information. Fleury has a market value of 2.88 billion reais, data compiled by Bloomberg show. The shares fell 20 percent last year.
Bradesco Seguros e Previdencia SA, a unit of Banco Bradesco SA, is Fleury’s second-biggest shareholder with a 16.3 percent stake. It has the right of first refusal on an acquisition of Core’s stake, one person said. Bradesco isn’t planning to increase its stake on Fleury, the person said, adding that the bank would be willing to sell depending on the price.
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