CADE approves, with restrictions, Fleury’s transaction in the diagnostic medicine market

The Administrative Council for Economic Defense – CADE approved with restrictions, three mergers in the market of support services for diagnostic medicine on 6 August 2014. The first regards the acquisition of Clínica Radiológica Menezes da Costa Ltda., by Labs Cardiolab Exames Complementares S/A (Merger file no. 08012.013191/2010-22). The second refers to the acquisition by Delta FM&B Fundo de Investimento em Participações of all the issued shares  by Diagnolabor Exames Clínicos S/A (Merger file no. 08012.008447/2011-61). Lastly, the third merger regards to the acquisition, by Fleury S/A, of the social capital of Labs Cardiolab Exames Complementares S/A (Merger file no. 08012.008448/2011-13).

By acquiring 100% of the social capital of Cardiolab, Fleury now holds the direct control of Clínica Radiológica Menezes da Costa and of Clínica Luiz Felippe Mattoso Ltda. – companies incorporated by Cardiolab in other transactions, both with activities in the sector of support to diagnostic medicine in Rio de Janeiro.

In the analysis of the transactions, it was observed a large concentration of Fleury in the markets of the echocardiogram, computerized tomography, ultrasonography, MRI, bone densitometry and mammography tests in the city of Rio de Janeiro.

To solve the identified competition problems, CADE’s Tribunal determined that Fleury must divest assets in Rio de Janeiro that, together, represent a turnover of BRL 28 millions. The units to be divested are confidential and must be conjointly transferred to a single acquirer, which cannot own more than 20% of the diagnostic medicine services market in the city. The acquirer also cannot possess corporate link with Fleury at the moment of the acquisition, neither keep corporate or contractual relationship with the company in the next five years, after the acquisition of the assets.

Furthermore, the group cannot carry out acquisitions in the city of Rio de Janeiro for a three-year period. In the two subsequent years, it must inform CADE of any merger, even if it does not meet the mandatory criteria for notification established by law. The restrictions imposed by CADE were established with Fleury with the signature of a Performance Agreement (TCD for its acronym in Portuguese).

“The objective of the obligation to refrain from carrying out new acquisitions is to provide to other competitors in these relevant markets the chance to gain part of the market, and, thus, to balance competition. Considering that the market is already problematic, and that one of the main strategies to consolidate is through mergers, the prohibition of new acquisitions makes sense”, explained the Reporting Commissioner Márcio de Oliveira.