May 16 (Bloomberg) -- Abbott Laboratories, the largest maker of heart stents and adult nutritional beverages, joined the dealmaking sweeping the health-care industry with a $2.9 billion agreement to acquire Chile’s CFR Pharmaceuticals SA.
Abbott will buy Kalo Pharma Internacional S.L., the holding company that indirectly owns 73 percent of CFR, and conduct a cash tender offer for the remaining shares outstanding, the Abbott Park, Illinois-based drugmaker said in a statement today. The equity value of the deal is about 53 percent more than CFR’s value of 1.05 trillion pesos ($1.89 billion), based on yesterday’s closing price. The offer is about 35 cents a share, the companies said.
The all-cash acquisition will more than double its drugs sales in the $73 billion Latin American industry, the company said. CFR will add to Abbott’s business of selling brand-name versions of generic medicines, an area that hasn’t met investor expectations. CFR’s price won’t prevent Abbott from more purchases to boost that area, Abbott Chief Executive Miles White said.
“I don’t feel particularly constrained by resources right now,” White said on a conference call. “There are some opportunities that we continue to consider. We want to enhance the markets and segments that are important to us.”
Abbott fell less than 1 percent to $39.06 at the close in New York. The shares gained 6.1 percent in the past 12 months.
CFR shares jumped 46 percent to 182 pesos in Santiago. The stock had been the best performer in Chile’s benchmark IPSA index, with a 9.2 percent gain in the month ended yesterday.
Santiago-based CFR, Chile’s biggest drugmaker, sells a range of products for women’s health, heart and respiratory diseases in 15 markets across Latin America. Abbott said it will also assume CFR’s net debt of about $430 million.
“This looks to be an interesting move by Abbott to double down in the portion of its business that has come under significant pressure and investor concern over the past year and a half,” said Derrick Sung, an analyst at Sanford C. Bernstein in New York, in a note to investors.
“Abbott’s current $5 billion established pharma business has been struggling to achieve positive growth” amid austerity measures in the developed European markets and government price controls and economic uncertainty in the emerging markets, Sung said.
About $118 billion of health-care mergers and acquisitions were announced or proposed last month, a record, according to data compiled by Bloomberg that dates back to 2002. It’s almost as much as the $174 billion that was earmarked for health-care deals for all of last year, the data show.
The deal comes as drug companies face slowing sales growth in the U.S. and Europe, triggered by the loss of patent protection for their biggest-selling medicines. The market in Latin America is growing two to three times faster and will surge to $124 billion by 2018, according to the research firm IMS Health Inc.
CFR sold shares to the public in 2011, raising $370 million to bolster expansion efforts in drug development and distribution. The company called off a $1.2 billion offer to buy South Africa’s Adcock Ingram Holdings Ltd. in February after failing to win enough support from shareholders.
CFR’s controlling family are descendants of Nicolas Weinstein, the son of Ukrainian immigrants, who founded a pharmacy in the center of Santiago called ‘Botica Italiana’ in 1922 to sell imported medicines as well as producing its own. The company got an early boost from the sale of its ibuprofen-based brand Aliviol to Bayer AG.
The three controllers are Alejandro Weinstein Crenovich, CFR’s chairman, Alejandro Weinstein Manieu, its chief executive officer, and Nicolas Weinstein Manieu who sits on the board. Weinstein Crenovich, the chairman, is the son of the founder. The other two are Weinstein Crenovich’s sons.
Colombia is CFR’s largest market, accounting for 30 percent of revenue, followed by Chile with 21 percent and Peru with 16 percent.
Abbott’s biggest acquisition came in 2000, when it purchased BASF SE’s pharmaceutical business for $7 billion. Last year it bought Idev Technologies Inc. and OptiMedica Corp., for a combined $560 million. Abbott’s former drug business was split off into North Chicago, Illinois-based AbbVie Inc. in January 2013, while Abbott retained the original company’s medical devices, nutritional products, diagnostic tests and generic drugs.
(An earlier version of this story corrected CFR’s value in pesos in the second paragraph.)