Pague Menos acquires Extrafarma for R$700 million

In mid-May, major Brazilian drugstore chain Pague Menos announced the acquisition of its competitor Extrafarma – a company of the Ultrapar holding - for R$ 700 million. The transaction increases Pague Menos' stores by one-third, as well as it will makes the chain the second largest of the country in the sector.

Pague Menos, which is backed by global equity investor General Atlantic, is willing to pay R$300 million for Extrafarma following the regulatory approval of the acquisition by the Administrative Council for Economic Defense (CADE) – which is still pending - and the remainder of the sum would be paid in two equal installments over the next two years. 

It is the first acquisition of the company following its R$746.9 million IPO in August of 2020 and according to Luis Novais, the vice-president of Pague Menos, the transaction goes in hand with its goal to expand operations in the North and Northeast regions of Brazil.

“Most of Extrafarma stores are in regions that we plan on opening units. If approved, the acquisition anticipates in 3 years our expansion plan for a reasonable price and high potential of synergy.”, he stated. 

Extrafarma is the sixth largest drugstore chain in Brazil, with 402 stores distributed in 10 states. With the purchase, Pague Menos will amount over 1,500 stores across the country, standing behind market-leader RD group, which owns the Drogasil and Droga Raia chains.

Following the signing of the purchase agreement, Ultrapar – which paid R$1 billion for Extrafarma in 2013 - also disclosed that is currently reviewing its portfolio, as well as it decided to focus the holding on opportunities along the downstream chain of oil and gas in Brazil, due to its strong operational scale and competitive structural advantages. 

Ultrapar and Extrafarma were advised by Bradesco BBI and leading law firm Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados in the deal, while Pague Menos was advised by full-service powerhouse Lefosse Advogados. 

“The acquisition of Extrafarma enhances Pague Menos’ new expansion phase. We accelerate our growth and strength our presence in the North and Northeast, as well as in assisting the Brazilian expanded medium class. We are prepared to continue the path of Extrafarma’s brand in a region we know better than anyone.”, announced Mario Queirós, Pague Menos’ CEO.