FASA Writes Expansion Prescription

Latin Healthcare Investments Management LLC recently closed its second deal in Latin America, investing $9 million in Farmacias Ahumada S.A. (FASA), Chile’s largest retail pharmacy chain, through its Latin Healthcare Fund LP (LHP).

For its part, FASA, which owns 148 drug stores in Chile, and 38 in Peru, approved a capital increase of roughly $45 million through the issuance of 52 million shares. Executives at FASA said the funds from the capital increase will support continued expansion in Chile, Peru and ultimately into Brazil.

Falabella, a major department store chain in Chile, also agreed to invest $20 million in FASA, gaining a 20% ownership stake in the company.

FASA’s intention to expand into other Latin American markets was a major reason LHP decided to invest in the company, said Anne Nisenson Mathias, an investment officer at Washington, D.C.-based Global Environment Fund for the Latin Healthcare Fund.

“Farmacias Ahumada has state-of-the-art management and technology,” she said. “We like the fact that they’re a market leader in Chile, with the efficiencies and capability to expand quickly into other Latin American markets.”

Ray Dunn, director of LHP said the firm plans to strengthen FASA’s competitive position by providing FASA with access to technologies developed by some of the funds investors.

Jose Codner, president of FASA’s board, said LHP’s participation and the strategic commitment from Falabella will provide the company with access to important U.S. health-care providers.

A spokesperson at Falabella said the company’s investment in FASA, “indicates our desire to participate in the pharmaceutical business at the retail level.”

Worldwide, Latin America saw the largest increase in over-the-counter (OTC) product sales in 1998, recording a 19.5% increase to $5.44 billion, according to a recent OTC market survey by IMS Health, reported the National Association of Chain Drug Stores (NACDS). Europe remains the largest market at $12.3 billion, followed by the U.S. at $11.7 billion.

Latin Healthcare Fund LP is a $54.7 million private equity fund created as a joint venture between GEF and Ascendant Healthcare International, a manager of health-care facilities. Chase Capital Partners, Inter-American Investment Corp., Healthsouth and United Healthcare Corp. are core investors in the fund, which is seeking to invest in managed care companies, hospital chains and other ancillary service companies in Latin America.

LHP’s made its first investment in 1997 in the Mexican hospital chain, Consorcio International Hospitals S.A., in 1997.