American pharmacy chain CVS has put on hold the negotiations for acquisition of DPSP group, owner of pharmacy chains Pacheco and Drogaria São Paulo, after the multinational decided to hold on plans of further acquisitions, according to a party close to the companies. CVS still considers the business as a strategic and interesting asset, therefore, the possibility that the transaction could be closed in the future is not ruled out.
CVS is holding a bit on acquisitions after the two large recent ones in a very short period of time, in which they spent US$ 12 billion and raised the debt/EBITDA ratio to 3.2. Their target is 2.7. They need to digest these acquisitions better and reduce the effects on its debt.
With R$ 6.1 billion in revenue last year, group DPSP has around 950 stores in Brazil. CVS already owns the chain Onofre, with 47 stores. According to sources, the value of the acquisition is around R$ 6 billion (approximately US$ 2 billion), same value paid by CVS to acquire the Target pharmacies.
Brazilian pharmacy retail market is going through consolidation in recent years and this consolidation has created two giants Raia Drogasil (RADL) (with R$ 7.4 billion in revenue in 2014) and DPSP. The market still offers a lot of opportunities for consolidation, given the large amount of small chains and even family owned stores.
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