Cade approves the purchase of São Bernardo Saúde by Athena Saúde with restrictions

In the judgment session held this Wednesday (17 June), the Administrative Council for Economic Defense (Cade) approved Athena Saúde Espírito Santo's acquisition of the companies belonging to the São Bernardo group, which operate in the health sector in the Brazilian state of Espírito Santo. The transaction was approved by Cade with the execution of a Merger Control Agreement.

During the review process, the General Superintendence of the agency identified competition concerns arising from the acquisition. However, Rapporteur Commissioner Luiz Hoffman, followed by the other Commissioners, reasoned the structural and behavioural remedies included in the agreement were sufficient to solve these potential problems.

Case history

With the transaction, Athena Saúde, bound by the agreement, acquires the São Bernardo group, a corporate group that includes the companies: Casa de Saúde São Bernardo, São Bernardo Apart Hospital, Centro Médico de Especialidades, Terapias e Diagnósticos Capixaba, Total Clínicas, São Bernardo Emergência, Ativa Serviços Empresariais, and Call Express Central de Atendimento.

Athena Saúde has four health plan providers that operate in the states of Espírito Santo, Paraná, and Piauí, with almost 500,000 beneficiaries, 9 hospitals and 47 clinics.  São Bernardo Saúde, in its turn, is a regional company that focuses on Espírito Santo.

The General Superintendence identified competition concerns in the market of group health insurance plans, especially in those targeted at businesses. The analysis encompassed 68 municipalities of Espírito Santo, focusing on 26 groups of municipalities where higher levels of concentration were found. As a consequence of the review, the General Superintendence decided to challenge the acquisition.

The Tribunal of Cade, agreeing with the General Superintendence, understood the operation would lead to concentration in several affected groups and, added to the barriers to entry and low degree of rivalry in the relevant markets, would probably bring about the exercise of market power by the investigated companies after the transaction.

Commitments made

To solve the competition concerns raised, merging parties and Cade signed a Merger Control Agreement. Under the agreement, the parties committed to sell part of their portfolio of business health insurance plans to a competing health insurance operator, where concerns were identified.

"This structural remedy is intended to make the purchaser of the divested portfolio an effective rival of SAMP in such markets, thus mitigating the decreased competition caused by SBS (which left the market to be part of the Athena Espírito Santo group),” stated Commissioner Hoffman in his vote.

Moreover, bound by the agreement, the companies undertake not to attract employees of the acquiring company; not to compete directly with the buyer for the divested business; to offer the possibility of having their hospitals in the coverage of competing health insurance operators; and to notify Cade of mergers and acquisitions in the health insurance market of Espírito Santo that involve their group.

The agreement also establishes a trustee should be appointed to oversee the process and ensure the obligations are being fulfilled.

"I regard the proposed remedies necessary and sufficient to mitigate the concerns raised by this acquisition and in conformity with the requirements of proportionality, feasibility, and verifiability, pursuant to the Guide of Antitrust Remedies of this Council,” concluded the Commissioner.

Access the Administrative Proceedings 08700.005969/2018-29.