Brazil's Amil to buy 52 pct of Medial for $354 mln
Amil Participacoes, Brazil's largest provider of supplemental health services, agreed on Thursday to buy control of rival Medial Saude to expand in the country's wealthiest state and cut operating costs.
Amil is buying 51.9 percent of Medial stock in a cash deal valued at 612.5 million reais ($354 million), the companies said in a securities filing. The deal is subject to approval by Brazilian health industry regulators.
Medical assistance and supplemental health services are thriving in Latin America's largest country as an expanding workforce buoyed by rising income buys more insurance-related products. Brazilians spent 135 billion reais last year in non-state insurance programs and medicines, up 30 percent from 104 billion reais in 2006, according to Health Ministry data.
Rio de Janeiro-based Amil said in a separate statement that the acquisition of Medial will help it boost its stake of the health-insurance market in the state of Sao Paulo to 15 percent from 7.9 percent currently.
Nationwide, a combination should help Amil grab a 10.1 percent market share, compared with 6.2 percent now, the company said.
Amil shareholders are offering their Medial counterparts a premium of about 17 percent above Wednesday's stock close. despite posting losses for six straight quarters, Medial was poised to ramp up presence in Sao Paulo through the opening of its Paulista hospital by the end of 2010.
This acquisition aims to consolidate Amil's leadership position in Brazil's supplemental health market, especially in the state of Sao Paulo, Amil said in the filing. We believe Medial Saude is an extremely strategic asset in that regard.
Medial was grappling with rising operational costs and claims amid pressure to raise fees. Earnings before interest, taxes, depreciation and amortization, a measure of operational performance known as EBITDA, had a shortfall of 46 million reais in the past quarter.
The combined company will have 4.2 million clients on its health plan and about 1 million on its dental plan, the filing said.
Medial shares had their biggest intraday gain in about a month on Thursday and rallied as much as 13.3 percent to 16.70 reais in Sao Paulo at midday. The stock has gained 70 percent since the start of the year.
Amil, which almost doubled this year, gained 9.2 percent to 13 reais.
($1=1.729 reais) (Editing by Lisa Von Ahn, editing by Dave Zimmerman)
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