Brazilian medical laboratories firm Fleury SA will acquire smaller rival Instituto Hermes Pardini SA, it said on Thursday, sending shares in both companies sharply higher.
Following the announcement, shares in Fleury were up 15.3% to 16.18 reais in Sao Paulo, making it the top gainer on Brazil’s Bovespa stock index, which fell 0.9%. Pardini stock was up 18.9%, at 19.98 reais.
Fleury will acquire Pardini in a cash and stock deal. Pardini shareholders will receive 2.15 reais per share, resulting in a 273 million reais ($52 million) total cash payment. Pardini shareholders will then receive 1.213 Fleury shares per each Pardini share.
Analysts at BTG Pactual said that “a merger between two national consolidators with strong brands naturally looks positive.”
“Fleury’s valuation is arguably cheap, but we believe that an effective re-rating will now depend on capturing these synergies and Fleury’s capital allocation strategy,” BTG added in a note to clients.
Considering closing prices on Wednesday, Fleury proposed the payment of a 14% premium to Pardini shareholders, Credit Suisse analyst Mauricio Cepeda said. Before the announcement, Fleury’s market capitalization was 4.4 billion reais, double Pardini’s 2.2 billion.
Taking Thursday intraday prices, the deal value would be close to 2.8 billion reais, around $535 million.
Fleury said the transaction would add up to 190 million reais ($36.3 million) to the combined company’s annual EBITDA. Credit Suisse estimated synergies between the two companies could reach 600 million reais per year.
The company will issue up to 70.5 million shares to finance the deal. The transaction is subject to approval by Brazil’s antitrust watchdog CADE.
