The Romanian drug retail market, which consists of around 8,000 pharmacies, with an annual business of around EUR2.2 billion, could see a new transaction in the coming period. According to people in the industry, Eugen Banciu, majority shareholder of Dona drugstores, is in talks to sell the company.
The negotiations partner is said to be UK giant Alliance Boots, the owner of the largest drugstore and beauty chain in Europe, which has been testing the Romanian market for several years. Neither Boots representatives nor those of Dona had commented the information.
Dona has around 220 drugstores and, with one unit valued at EUR200,000, the entire chain could be worth over EUR40 million.
According to information provided previously by the company, Dona’s annual sales per drugstore amount to around EUR850,000. Last year, Dona reported a turnover of 755.6 million lei (EUR178 million). Information about the sale of the Dona chain to another investor also emerged on the market in 2008, but no deal has been closed.
The sale of Dona would be the second major transaction this year after Sensiblu took over 90 City Pharma drugstores in May in a EUR15 million transaction.
Changes in the drug retail
If it goes through, the deal will be the largest in Romanian drug retail during a troubled time when modifications to the pharmacy law are expected.
As of 2013, the demographic conditions could be removed from the pharmacy law, which now sets the number of drugstores in a city based on the number of inhabitants.
This criterion slowed down the expansion of pharmacy networks, as they were forced to grow only by acquiring already existing licenses. As the demographic norms will go away, owners will be able to open drugstores wherever they want, so competition might increase significantly.
Boots has been present in Romania for several years both in distribution, as it is a stockholder in German group ANZAG group – the owner of local drug wholesaler Farmexpert – and in retail, as its products are sold in Sensiblu drugstores.
In 2011, Alliance Boots posted revenues of over EUR23 billion and is structured into several divisions, with the most important ones being health & beauty and pharmaceutical distribution.
Boots operates in 11 countries through its 3,330-unit chain of pharmaceutical and beauty products. A 45% stake in Alliance Boots is held by Walgreen Co, the largest pharmacy operator in the US.
Romania is considered one of the friendliest countries in terms of pharmaceutical market regulations because it allows the creation of pharmacy chains. Many countries in Europe have not liberalized this market, so there are no chains or pharmaceutical brands.
Solid growth
The Romanian pharmaceutical market has increased considerably in the past few years (in 2011 the growth was 11.5%), and it was one of the few industries that had grown during the crisis.
This would not be Banciu’s first deal this year, after he sold to ANZAG a 20% stake in Farmexpert, no. 2 on Romania’s drug wholesale market, with turnover of EUR430 million last year. In 2006, Banciu sold the majority stake in the wholesale company to ANZAG, and now holds only 20% in Farmexpert.
Note:
In reply to the “Pharmaceutical market prepares for major deal, targeting 220 pharmacies” story published by Ziarul Financiar on September 17, 2012, Eugen Banciu, majority shareholder of Dona pharmacies, said:
“There is no ‘table of negotiations’ and no transaction targeting my shares in Dona Pharmacies and I never made any statement to this effect ; so, the industry sources cited by you either do not exist or are not worthy of confidence.”
ZF wrote in its article that “the Romanian drug retail market, which consists of around 8,000 pharmacies, with an annual business of around EUR2.2 billion, could see a new transaction in the coming period. According to industry sources, Eugen Banciu, majority shareholder of Dona drugstores, is in talks to sell the company. The negotiations partner is said to be UK giant Alliance Boots, the owner of the largest drugstore and beauty chain in Europe, which has been testing the Romanian market for several years.”
ZF also wrote that Dona has around 220 pharmacies, and with one unit valued at EUR200,000, the entire chain would be worth over EUR40 million. ZF specifies the data used are ZF estimates and doesn’t claim they are based on market surveys or valuations by specialized companies, instead this is a basic journalistic undertaking. The same basic evaluation has been used for ZF estimates assessing the value of the 20% stake in Farmexpert that Banciu sold.
Eugen Banciu also said that Nicusor Nistor continues to be his partner at Dona pharmacies. Ziarul Financiar mistakenly wrote that “up until recently he had had businessman Nicu Nistor as a partner.”
(English version by Daniela Stoican)