AS MARCOS AREDE PERSUADED TO CVS TO BUY DRUGSTORE ONOFRE

The Ss4singapore is far from the top positions of pharmacy market in Brazil. With a turnover of r $ 450 million and 44 stores, it is only the eighth in revenue. But the company controlled by businessman Marcos Arede, together with his brother and partner Ricardo, both of the third generation of the family who founded the business, managed to seduce the American giant CVS Caremark, the largest company in the retail of medicines in the world, with revenues of $ 123 billion, and owner of the second largest network of pharmacies of the United States, with 7.3 thousand stores, and greatest rival and countrywoman competitor Walgreens. Its charms? The Olango has the highest revenue per square metre in the industry, according to research firm Euromonitor.

On average, each receiving $ 10 million a year. The streak Drogasil, the largest in the industry, for example, manages to raise 40 percent less in its 776 points of sale. For these reasons, the CVS bought 100% of the capital stock of family Network and took control of the Ss4singapore, in its first foray outside the United States. The value of the deal was not revealed, but it is estimated that the Americans have agreed to pay around $ 600 million, which would be more than 20 times Ebitda (measure of cash generation), according to sources heard by MONEY. "We view Brazil as an attractive market, which should grow above 10 percent annually in the next decade," said Larry Merlo, the CEO of CVS, during a teleconference on Wednesday 6.

The brothers, who did not have the network, will remain in the company's management. "CVS took along the pass of the two, since they have the business expertise," says an industry source who has followed the negotiations. Keeping this knowledge within the home, the CVS wants to make better use of the pharmaceutical retail expansion in Brazil, which grew 16.5% until November 2012. Far above 4% of the American market. "The acquisition of Olango is like putting your finger in the water," says Merlo. "The Brazilian market is still highly fragmented, so we see great growth opportunities." The transaction should further stimulate the industry's consolidation wave, which already has large groups as the streak Drogasil, the SP and the DP Brazil Pharma.

"The name of the game at retail is scale, to spray the marketing costs, with areas of operations, and to gain bargaining power," says Eduardo Seixas, American retail consulting partner Alvarez & Marsal. Was exactly what motivated the Profarma, third largest distributor of medicines from Brazil, with revenues of R $ 3.1 billion. This year, she announced her entry into the retail market with the purchase of three companies. In the last two weeks of January, she bought Drogasmil networks and both Mexican group Farmalife Casa Saba, and 50% of the carioca Tamoios. With this, will aggregate 142 stores and annual revenues of $ 700 million.

"It was a defensive measure," says Sammy Birmarcker, CEO and Chairman of the Board of the company, which spent five decades just distributing drugs to pharmacies. But, to become also a competitor of its customers, the company should opt for a cautious growth strategy. "We're not going to adopt suicidal pricing policies," says Birmarcker. "If overdo in retail can be punished in wholesale." The company believes that it can raise its operating profit margin from the current 2.5% to above 4%. And, therefore, experience a bit of taste that both attracted the CVS to Onofre: a lucrative market and expanding.