Shares of Brazil’s Fleury jump on reports of talks with Rede D’Or

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SAO PAULO (Reuters) -Shares of Brazilian medical diagnostics company Fleury jumped on Monday after reports of a potential acquisition by hospital chain Rede D’Or, which analysts said could generate synergies.

Fleury’s shares rose more than 15% in trading in Sao Paulo, making it the biggest gainer on benchmark stock index Bovespa, which was up 0.6%. Rede D’Or, meanwhile, gained 1.2%.

Multiple local media outlets said on Sunday that Rede D’Or was in talks with Fleury on a deal that could combine Brazil’s largest integrated healthcare network with a leading medical lab chain.

Brazil Journal reported, citing sources, that Rede D’Or was working on an offer that could include both a cash payment and share swap. Fleury counts lender Bradesco as one of its main shareholders.

Rede D’Or said on Monday it continuously evaluates opportunities to expand, including potential acquisitions or business combinations, but that no decision or proposal had been made for a potential deal with Fleury.

In a separate statement, Fleury said it regularly analyzes market conditions but also noted that no decision had been reached on a potential transaction with Rede D’Or.

Goldman Sachs analysts said Fleury could benefit under Rede D’Or’s management from better procurement terms, especially on materials, in which there would be some overlap, and a leaner general and administrative structure.

Fleury has a market capitalization of 6.91 billion reais ($1.24 billion), while Rede D’Or’s market cap stands at 75.29 billion reais, according to LSEG data.

Rede D’Or in 2022 acquired insurer SulAmerica in a deal worth 13 billion reais, part of a trend for consolidation in Brazil’s healthcare sector that saw the hospital chain as one of the most active companies in recent years.

Analysts at Santander said a deal between Fleury and Rede D’Or would make sense from a strategic point of view.

“Main synergies could be related to higher scale, and therefore more bargaining power to buy materials at Fleury and G&A savings,” they said.

($1 = 5.5704 reais)

(Reporting by Gabriel Araujo; Editing by Paul Simao)