Pharma buy first to pass phase II of Peru’s new antitrust law

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Philippi Prietocarrizosa Ferrero DU & Uría (Peru) has helped local drug manufacturer Farmacéutica Euroandina acquire local counterpart Hersil in the first deal to pass phase II of the country’s new merger control regime.

Hersil turned to Miranda & Amado for the deal. The transaction closed on 31 October, nearly one year after it was signed. No value was disclosed.

Through the deal, Euroandina acquired a 100% stake in Hersil’s operations. The seller manufactures and distributes medicines, natural remedies and food supplements. The buyer also obtains Hersil’s logistics subsidiary Signia Soluciones Logísticas.

The deal is the first to pass through phase II of Peru’s new merger control regime, which was enacted last year. Previously, only M&A deals in the electricity sector had to be notified to the country’s antitrust authority Indecopi; but following the reform, transactions from all industries must be reported to the regulator.

Indecopi approved Eurandina’s acquisition, which is subject to meeting certain conditions, despite the deal having been put under review as part of the Peruvian authority’s phase I process after the deal was signed in November 2021. The phase I investigation found that the acquisition posed competition concerns in three different Peruvian drug markets: urinary antiseptics, nasal sprays and aminoglycosides.

The deal was then submitted to a phase II review, which found that the acquisition could limit the competition in those three pharmaceutical industries as Hersil and Euroandina both compete within those sectors. In order for the deal to go ahead, Indecopi imposed several behavioural remedies so that the acquisition does not interfere with local competition.

As part of this agreement, three of Hersil’s branded medicines will be licensed to an unnamed company for five years. During that time, Euroandina will not be permitted to increase the prices on any of its products in those drug markets.

PPU competition director Verónica Vergaray says that participating in the recent transaction has put the firm in a stronger position to work on future deals under the new antitrust policy, despite some initial trepidation from businesses and lawyers about the new rules. “We were met with a very receptive authority that was open to dialogue even when they did not agree with our point of view,” says Vergaray. She adds that the process was a “learning curve” for both the PPU and Indecopi as the two parties navigated new legal territory whilst also in the wake of the covid-19 pandemic.

The competition director added that the recent acquisition set a precedent for Peruvian antitrust law, with the price cap remedy imposed on the companies having helped set the rules for establishing “reasonable” terms in complicated competition cases.

PPU M&A partner Guillermo Ferrero added that another landmark feature of the case was the long timeframe. He said that an important aspect of the deal was to negotiate time-sensitive aspects of the sales purchase agreement early on, due to the possibility of the company’s overall value fluctuating over the 11-month period between signing and closing.

Founded in 2014, Lima-headquartered Euroandina manufactures branded and generic drugs for multiple areas of medicine, including dermatology, respiratory and oncology.

Peru’s Hersil was established in 1965 and manufactures and distributes medicine. In 2012, it launched its packaging and delivery subsidiary Signia Soluciones Logísticas.

Counsel to Farmacéutica Euroandina

In-house counsel – Connie Univazo

Philippi Prietocarrizosa Ferrero DU & Uría (Peru)

Partner Guillermo Ferrero, director Verónica Vergaray and associates Victor Abad, Jose Antonio Salgado and Ximena del Rosario

Counsel to Hersil

Miranda & Amado

Partners Roberto MacLean, Enrique Felices, Fiorella Zumaeta and Pablo Sotomayor, and associates Mariano Peró, Luis Miguel Sanchez and Alejandra Quintanilla