Brazilian Health-Care Companies Plan Multi-Billion Dollar Merger 

(Bloomberg) -- Brazil's Hapvida Participacoes e Investimentos SA and Notre Dame Intermedica Participacoes SA agreed to merge their businesses in a multi-billion dollar deal that attempts to redraw the country's battered health-care system.

Hapvida investors will own 53.6% of the new company, while Intermedica's will have 46.4%, according to a Saturday regulatory filing. The agreement comes about seven weeks after Hapvida presented a non-binding proposal to merge the businesses.

“If completed, the transaction will result in the creation of one of the world's biggest companies providing verticalized health-care solutions,” the firms said in the filing.

The deal, creating a company with a market value of more than 110 billion reais ($19.6 billion), comes as Brazil grapples with a pandemic that has cratered the economy, left many hospitals close to collapse and killed more than 250,000 of its citizens. Brazil Journal, which broke the news on Friday, said the merger would be the country's biggest since Itau and Unibanco combined in 2008.

The new company will be led by Intermedica's Irlau Machado Filho and Hapvida's Jorge Pinheiro as co-CEOs. Hapvida will appoint five board members, including the chairman, and Intermedica will pick two names. The other two independent members will be appointed by each company's board of directors.

No Risk

In August, Pinheiro said his company was on the hunt for acquisitions, especially as the pandemic posed significant challenges for the nation's hospitals. In January, he said in a conference call with investors that he saw no “risk from a competitive point of view” to a deal with Intermedica, given the two firms had little or no geographic overlap.

Intermedica's holders will receive 5.2490 Hapvida ordinary shares and 6.45 reais for each share they own, which is equivalent to 88 reais based on Friday's close. The value of the cash payment will be updated until the deal's conclusion based on the CDI rate change.

The deal implies a 15% premium -- from 10% in the original proposal -- over Intermedica's market value based on the average price of the shares in the 20 trading days before Dec. 21, according to the filing.

Hapvida hired BTG Pactual and Itau BBA as financial advisers, while Intermedica was working with JPMorgan and Citibank. The transaction cost of the deal is estimated at 116 million reais, according to the filing. The new company would have 20% of the market based on the number of users and 10% by revenue, Valor Economico reported in January.

The deal now needs to be approved by both sets of shareholders in extraordinary general meetings that were scheduled for March 29, as well as by the sector's regulator (ANS) and Brazil's antitrust regulator (Cade).

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