Research and analysis

Chile / Mexico: Boots makes major acquisitions

Published 21 May 2014

0.1 Summary

Boots the Chemist announces the purchase of Chile’s second largest pharmacy chain Farmacias Ahumada, and Mexico’s third largest pharmacy chain Farmacias Benavides, in a deal with Mexico’s Grupo Casa Saba valued at US$ 636 million.

0.2 Detail

UK based Alliance Boots announced on 6 May the purchase of Chile’s second largest pharmacy chain Farmacias Ahumada (over 400 branches), and Farmacias Benavides in Mexico (nearly 900 branches), by acquiring the chain from the Mexican Group Casa Saba in a deal worth US$636 million.

Both Chile and Mexico offer significant opportunities for UK investment and export in the retail sector, with populations of 17 million and 112 million respectively, and growing young middle classes. Leading Consultancy firm AT Kearney’s Global Retail Development Index recently named Chile as the second best emerging market in the world for opportunities in the retail sector. The market entry of this well known UK brand in Chile and Mexico, where British brands and products are particularly well received, is further evidence of how buoyant the sector is in both countries. Alliance Boots, owned in part (45%) by the US Walgreen Group, follows in the footsteps of UK retailers joining the Chilean market including Waitrose, Jaguar, Aston Martin, Lush, Oasis, Miss Selfridge, ISSA London, Burberry, Hi-Tec and others. In Mexico, major British brands like Burberry, Accessorize, Hackett, Thomas Pink, Aston Martin Lush and Ben Sherman have already established considerable success. Mexico has one of the biggest markets for personal care and beauty products in Latin America, valued at up to US$14bn in 2013 (putting it 12th worldwide).

Alliance Boots said it hopes to complete its all-cash purchase, which is subject to regulatory approval, by the third quarter of 2014. The transaction is being managed by Baker & MacKenzie, a London-based corporate finance firm through its offices in Santiago, Chile. The proposed purchase in Mexico still needs the approval of the Federal Commission for Economic Competence (COFECE).

Stefano Pessina CEO of Alliance Boots said that for the first time consumers in Chile and Mexico would be able to access Boots own brand products such as cosmetics and skin care.

Farmacias Benavides is the third-largest pharmacy chain in Mexico with 882 stores in 153 cities, whilst FASA has 404 stores in Chile in 98 cities. Together, the two chains have combined annual revenue of about $1.4 billion (£835m) and jointly serve 130 million customers per year. Casa Saba works with pharmaceutical products, health and beauty aids, publications, and other consumer products. In 2013 its Mexican distribution line was sold for £205 million to Pharma Equity Global Fund LLC and World Global Equity Fund LLC (two US investment funds). Pharmacies represent 60% of Casa Saba’s Mexican income, but sales were down by 28% in 2013. The media reports that Casa Saba will be selling their Mexican pharmacies for less than they purchased them.

0.3 Comment

UKTI in both countries have been introducing more UK businesses to this buoyant sector. Chile and Mexico are the two countries with the highest number of Free Trade Agreements in the world, with easy access to market. If the purchase goes through, Boots will be registered as a distributor in Chile and Mexico, which should make it easier for UK products to enter Mexico and others in Latin America.

0.4 Disclaimer

The purpose of the FCO Country Update(s) for Business (”the Report”) prepared by UK Trade & Investment (UKTI) is to provide information and related comment to help recipients form their own judgments about making business decisions as to whether to invest or operate in a particular country. The Report’s contents were believed (at the time that the Report was prepared) to be reliable, but no representations or warranties, express or implied, are made or given by UKTI or its parent Departments (the Foreign and Commonwealth Office (FCO) and the Department for Business, Innovation and Skills (BIS)) as to the accuracy of the Report, its completeness or its suitability for any purpose. In particular, none of the Report’s contents should be construed as advice or solicitation to purchase or sell securities, commodities or any other form of financial instrument. No liability is accepted by UKTI, the FCO or BIS for any loss or damage (whether consequential or otherwise) which may arise out of or in connection with the Report.