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Hypermarcas Falls Most in 7 Months on Mantecorp Deal

Hypermarcas SA, the Brazilian consumer-goods company that made more than 10 acquisitions this year, fell the most in seven months after saying it will pay about 2.5 billion reais ($1.5 billion) for drugmaker Mantecorp Industria Quimica & Farmaceutica SA.

Hypermarcas slid 6.3 percent to 23.10 reais in Sao Paulo trading, the biggest decline since May 20. The stock is up 16 percent this year, beating the 1.9 percent drop in Brazil’s benchmark Bovespa index.

The company, based in Sao Paulo, will pay 600 million reais in cash for 24 percent of closely held Mantecorp and issue 78 million shares to its owners, the Mantegazza family, for the remaining 76 percent, according to a regulatory filing yesterday. The new stock would be valued at 1.92 billion reais, based on the Dec. 17 Hypermarcas closing price of 24.65 reais.

The acquisition is “negative because it causes dilution for shareholders,” Caue Pinheiro, an analyst at SLW Corretora in Sao Paulo, said in a telephone interview today. “However, in general, it’s positive in the long term.”

This year Hypermarcas has acquired companies including generic-drug manufacturer Laboratorio Neo Quimica, diaper-maker Sapeka and Colgate-Palmolive Co.’s soap brand. Hypermarcas wants to boost sales by an average of 65 percent in the next five years, Chief Executive Officer Claudio Bergamo said in an Aug. 11 interview.

The company will focus on integration and organic growth in 2011, and expects operational savings of more than 148 million reais after the full integration with Mantecorp, Bergamo said in a conference call with investors and analysts today.

‘Like a Boa’

“It is like a boa after eating a cow,” Bergamo said. “It needs some time to digest. We will go through this digestion phase in 2011.”

Mantecorp, the Rio de Janeiro-based owner of the Episol sun-protection brand and Epidrat moisturizers, will report net sales this year of 572 million reais and gross profit of 375 million reais, according to a presentation by Hypermarcas. About 46 percent of Mantecorp’s sales come from prescription drugs, 30 percent from over-the-counter medicines, 16 percent from skin-care products and 8 percent from generic drugs, it said.

The acquisition could create savings of at least 750 million reais as well as tax savings, compensating for the share dilution, according to Daniela Bretthauer, an analyst at Raymond James & Associates Inc. in Sao Paulo.

The deal is positive even with the dilution and the “somewhat rich price paid for Mantecorp,” Bretthauer wrote in a report sent to clients today.

Hypermarcas expects its margin on earnings before interest, taxes, depreciation and amortization -- a measure of profitability -- to reach 47 percent in the first half of 2013, from 21 percent now, Bergamo said today.

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