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CVS closes deal to buy Brazilian drug chain
February 6th, 2013
Onofre is Brazil's eighth-largest drug chain by sales.
WOONSOCKET, R.I. – CVS Caremark Corp. has acquired Drogaria Onofre, a Sao Paulo, Brazil-based retail drug chain with 44 stores.
Larry Merlo, president and chief executive officer of CVS Caremark, said Wednesday during a conference call on the company's fourth-quarter results that the Onofre deal closed late last week. Terms of the agreement weren't disclosed.
"This transaction is not financially material to our company. However, it is our first foray into the international drug store space," Merlo said. "We have been exploring opportunities for possible international expansion. And we've said many times that our approach would be measured and we would exercise financial discipline. We believe this acquisition is a great example of that strategy in action."
In early December, the newspaper Valor Economico had reported that CVS was in advanced talks to buy Onofre and that if a deal was reached CVS would pay 650 million Brazilian reals ($313 million U.S.) to purchase an 80% stake in the chain and take on the company's debt. CVS declined to comment at the time.
According to the Valor Economico report, Onofre is Brazil's eighth-largest drug chain by sales and has stores in Sao Paulo, Rio de Janeiro, Minas Gerais, Espirito Santo and Rio Grande do Sul states. The chain is controlled by the Arede family.
"Onofre has a strong reputation in the marketplace," Merlo said Wednesday in the conference call. "They do a great job in tailoring their stores to the market and to different customer segments. And we view Brazil as an attractive market, given that health care and pharmacy are expected to grow by double digits over the next decade. And while chains are prevalent, it is still a highly fragmented market. So we see nice opportunities to grow the business over time."
CVS' chief rival, Walgreen Co., jumped into the international market this summer with a deal to buy a 45% equity stake in Alliance Boots, a global pharmacy and health and beauty aids retailer, for $6.7 billion in cash and stock. Walgreens closed the the first step of the two-phase agreement in early August. Under the agreement, Walgreens has the option to acquire the remaining 55% of Alliance Boots in about three years for $9.5 billion in cash and stock.