Hapvida-NotreDame Intermédica: Double beds

In February, Brazil's largest health insurance companies ─ Hapvida and NotreDame Intermédica ─ announced a multi-billion-dollar merger agreement, creating a leading company in the healthcare sector with over 8.4 million clients and 70 hospitals nationwide as well as a market value of over R$110.5 billion. ($19.5 billion).

The deal was one of the main reasons for the volume of mergers and acquisitions in Brazil growing by a factor of eight in the first half of 2021 compared to the same period last year, to $56.8 billion.

Hapvida will own 53.6% of the new company, whilst NotreDame will have the remaining 46.4% stake

Hapvida will own 53.6% of the new company, whilst NotreDame will have the remaining 46.4% stake. It is the largest corporate merger in Brazil since the groundbreaking merger between Itaú and Unibanco, two of Brazil's largest financial institutions, in 2008.

The merger pairs Hapvida’s presence in Brazil's North and North-East ─ in states such as Alagoas, Amazonas, Bahia, Pernambuco, Rio Grande do Norte, Sergipe ─ with NotreDame’s robust South-East operations, whilst synergies are expected to reduce the new group’s operating costs by 15%. Irlau Machado, NotreDame's CEO and Jorge Pinheiro, the CEO of Hapvida, will serve as co-CEOs of the new company, with each responsible for the aforementioned geographic regions.

Awaiting a green light 
The merger now awaits the approval of the Brazilian authorities, such as national antitrust regulator the Administrative Council for Economic Defense (CADE) and the National Agency of Supplementary Health (ANS).

In September, CADE requested new diligence analysis of the agreement, having identified certain regions and cities where the merger would create an anti-competitive environment for local consumers. 

Although the entire merger itself is not likely to be threatened, CADE may ask for remedies via the divestment of certain assets.  At most, the companies would be forced to sell off 9% of their client base for the merger to be approved.

“I am really excited to be a part of such a historical moment in the private healthcare industry in Brazil. I have always dreamed about developing a company of such magnitude. If this transaction is approved, it will transform the healthcare industry in our country,” stated Machado, after news of the agreement broke last spring, while his counterpart at Hapvida added “this transaction is taking place at a crucial moment in the Brazilian healthcare industry and in the worldwide healthcare industry. We need to be able to offer alternatives to our citizens, to improve their health care so that we can fulfill our mission, which is to serve our population with high-quality in an affordable manner.”

Hapvida was assisted by renowned Brazilian law firms Pinheiro Neto Advogados and Madrona Advogados in the deal, whilst also relying on BTG Pactual and Itaú BBA as financial advisors. NotreDame, respectively, received legal support from well-known São Paulo-based law firm Souza, Mello e Torres, as well as financial support from Citigroup and JP Morgan.