One Brazilian Dx giant gets new majority shareholders, and another may be sold

Two of the biggest players in Brazil's diagnostics industry are likely to confront major changes in the coming months--both worth noting as global competitors seek to enter one of the largest emerging markets around.

The Wall Street Journal reported that two shareholders with Diagnosticos da America SA, or DASA, have grabbed a controlling stake in the company, which has a large market share but has faced brisk executive turnover. And major competitor Fleury SA is potentially up for sale.

First, let's talk about the DASA news. If you're not familiar with the name, you should be because DASA ranks number one among Brazil's diagnostics companies. As the WSJ noted, the company booked $750 million in revenue in the first 9 months of 2013 and has 12% of the Brazilian market (based on Fitch Ratings data). With that in mind, the industry is likely watching closely now that businessman Edson Bueno and ex-wife Dulce Bueno have snatched up 119.5 million shares in DASA in a deal worth $747 million, according to the story. Both Buenos had previously owned a 90% stake in Amil Participações, a Brazilian health insurance outfit, but they sold it in 2012 for $4.3 billion.

The Buenos' investment in DASA is certainly a change in strategy for them. But DASA's new controlling investors could push for major changes, something likely after a rough stretch in recent years. Back in 2012, investors pummeled DASA's stock because the company had worked its way through multiple CEOs and CFOs in the course of a year and dealt with slumping sales. Investors then apparently wanted a concerted strategy for DASA to fuel new growth as Brazil generates more income and people increasingly shifted from the public health system to private providers. New investors with power can make that happen and more.

Fleury, another major Dx market leader in Brazil, may be sold. The WSJ reported that Carlyle Group (which recently bid $4.15B for Johnson & Johnson's Ortho Clinical Diagnostics business) is possibly interested in Fleury. So is Brazil's Gávea Investimentos, and both reportedly have negotiated through a local J.P. Morgan unit to potentially snatch up the company. Other private-equity funds may also be interested, the story explained.

Both Fleury and DASA, because they are among Brazil's largest diagnostics players, rise above a fray that includes many smaller, fragmented rivals, according to the article. Their size gives them clout and the power to shape an industry in Brazil as it matures. Fleury in particular is a go-to partner for companies seeking to expand in Brazil, with more than 3,000 clinical laboratories and hospitals throughout the country. Last fall, for example, California's Ariosa Diagnostics partnered with Fleury to market its Harmony Prenatal test, which screens for conditions such as Down syndrome. There is a potential for many more of those deals down the line, and a new investment firm owner would push hard to grow the business and unlock as-yet-unmet revenue potential. 

- read the full WSJ story (sub. req.)

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