Pair Team Up for Lab Company Stake

Latin Healthcare Investments Management LLC and Patrimonio Investimentos e Participacoes have together committed $50 million to Delboni-Auriemo, a major Brazilian clinical lab and diagnostic center, through their respective funds – the $60 million Latin Healthcare Fund LP, (LHP), and the $243 million Brazil Private Equity Fund.

Jay Dunn, managing director of LHP, said the investment represents a 49% stake in Delboni-Auriemo. In addition, the firms hold another 5% stake in non-voting preferred shares following the investment, which set a valuation on the company of about $100 million, Dunn said.

Chase Capital Partners, a limited partner in both funds, originally brought the two parties together. The private equity arm of Chase Manhattan Corp. committed $20 million to LHP, and is the lead investor in the Brazil Private Equity Fund, as well a part-owner of the general partnership.

Delboni-Auriemo has 20 outpatient centers in Sao Paulo, making it the largest such Brazilian company in terms of volume, and the second largest in terms of revenue, Dunn said.

The company’s strategy in raising this capital is to take advantage of the growth expected in private health care in Latin America that will stem from the aging of the population, development of a larger middle class, and as governments throughout the region permit less-regulated health-care sectors to develop.

“We saw a lot of growth potential in opening new facilities, and [in] acquiring competitors,” said Dunn. “Our goal beyond that is to go to other major markets in Brazil. Insurance companies would love a national network of labs.”

Officials at Patrimonio could not be reached for comment. But Dunn said Patrimonio, which organizes management buyouts in Brazil, has the ability to handle the management and the financial structuring. “And we have knowledge of the health-care sector. That’s how we won this deal. We came into the process late, which we were able to do because of that combination,” he said.

Roughly 40 million Brazilians have private health insurance, or about 25% of the population.

“But [the sector] is enormously fragmented,” said Dunn. “There’s something like 200 HMOs in Brazil, and [more than] 500 private labs in Sao Paulo alone.”

Aside from that fragmentation, Dunn said other reasons to invest in Latin American health-care companies right now include the maturity of the U.S. market versus the rapid growth in Latin American health-care, and companies have much room for improvement. Moreover, he said health-care represents as much as 15% of any country’s gross domestic product.

In Latin America and the Caribbean, that percentage is 7.2%, according to figures from the World Health Organization, except in Argentina, Panama and Uruguay, where it is nearly 10%, which is considered high for the region.

The team is also closing on its second combined deal in Brazil this week that, along with the stake in Delboni-Auriemo, would comprise “20% of the Sao Paolo private lab market in terms of volume,” according to Dunn. He declined to offer specifics on that deal.