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Celesio will buy majority stake in Protek

The EU's biggest drug distributor Celesio is in talks to buy a majority stake in Russian drug company, Protek

German-headquartered Celesio, which is the EU's biggest drug distributor, is in talks to buy a majority stake in Russian drug company, Protek.

If Celesio succeeds in acquiring Protek, which posted revenue of USD 2.4bn in FY06, it would gain access to the rapidly expanding Russian market. Protek controls nearly 25 per cent of the drug distribution market in Russia and operates the country's second-biggest pharmacy chain.

Protek also owns 630 pharmacies that generated sales of about USD 250m in FY06. In addition, it operates a production company for liquid pharmaceuticals.

Like other companies in Germany, Celesio has suffered from tough German government measures to cut healthcare costs in the EU's biggest pharmaceutical market. Many companies have sought to expand their businesses outside the unfavourable German market in order to increase revenues.

For example, German generics manufacturer Stada bought Serbian pharmaceutical company Hemofarm for EUR 494m in 2006 and is also in the process of acquiring Russian pharmaceutical company

Makiz for approximately EUR 135m. According to media reports, Stada could pay as much as 2.6 times current sales for Makiz, after acquiring Hemofarm for 2.4 times 2005 sales.

Celesio also owns the Lloyds pharmacy chain in the UK, while Haniel, which is the parent company of Celesio, also controls German retailer Metro.

Although Celesion did not disclose any financial details, it did say it expected negotiations to be complete by mid-December 2007. On 15 October, Celesio's shares were up 0.3 per cent to rest at EUR 40.50.

In a press statement Celesio's CEO Fritz Oesterle said: "We believe that the Russian economic environment in general, the pharmaceutical market in particular and especially Protek are great and attractive opportunities for Celesio. We will support the existing strong retail and wholesale activities and the further development of the Protek group."

Vadim Yakunin, Protek's CEO, added: "We welcome Celesio as an experienced strategic partner for a long-term collaboration. We expect to profit from synergy effects and to facilitate the expansion of our activities."

30th September 2008

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