A Toyota-owned firm is set to acquire an extra 69.9 percent stake in pharmaceutical distributor Goodlife Pharmacy, giving it full control of the drugstore as the Japanese conglomerate boosts its dealing making in East Africa.
Paris-based CFAO Group, a subsidiary of Toyota Tsusho Corporation, has inked a deal for the buyout of a majority stake in Goodlife — which operates under Mauritius-based holding company Africa Chemist and Beauty Care Inc (ACBC).
The proposed acquisition of 69.9 percent from LeapFrog Investments and management shareholders will see CFAO Healthcare acquire sole control over ACBC and its subsidiaries — Goodlife Holdings Ltd and Goodlife Pharmacy Ltd in Kenya as well as Goodlife Pharmacy in Uganda.
The healthcare division of the Japanese conglomerate will take full ownership of the pharmaceutical firm, having bought a minority 30.1 percent stake from Leapfrog Investments in 2022.
CFAO is executing the multi-billion shilling deal, whose exact financial consideration has not been disclosed, through its healthcare subsidiary, CFAO Healthcare.
Comesa Competition Commission (CCC) disclosed the deal in a notice where the watchdog is seeking the input of the public ahead of approving the transaction.
CFAO Healthcare reckons, in the regulatory filings with CCC, that the transaction is in line with its ‘African Growth Strategy’ that seeks to deepen its reach in Kenya and Uganda, capitalising on ACBC’s established branch network in the region.
CFAO Group, 97 percent owned by Toyota, is involved in the wholesale distribution of pharmaceutical products in at least 24 countries in sub-Saharan Africa.
“The parties further submitted that the CFAO Group partners with leading international brands and covers the entire value chain – imports, production and distribution – in line with the best international standards, drawing on 170 years of hands-on knowledge and local expertise,” the Comesa watchdog wrote in the merger inquiry notice.
“The CFAO Group pursues a two-fold strategy, focusing on manufacturing to promote local production, and distribution through its distribution network to offer tailored affordable products and services to people across Africa.”
The deepening of its presence in the pharmaceutical industry in Kenya adds to other established interests.
These include motor vehicle and motorcycle assembly and dealership through CFAO Mobility Kenya as well as agri-business where it sells farm machinery and equipment, including tractors, under Case IH brand.
It also deals in equipment for seaport development such as cranes under the Energy and Infrastructure Division and Project Division, which offers market research and business development services.
Goodlife is involved in the retail distribution of medicines, beauty and personal care products as well as the provision of associated health services such as primary care consultations and pathology sample collection through its subsidiaries in Kenya and Uganda.
The deal will see Leapfrog, a private equity firm that gained full control of Goodlife in November 2016 after buying out Catalyst Fund for Sh2.2 billion, exit the business after nearly 10 years.
The Comesa competition watchdog has given competitors, suppliers and customers of the parties to the proposed transaction up to March 11 to submit written representations to be considered before the deal is approved or rejected.
Goodlife was founded in 2014, initially trading as Mimosa Pharmacy, and sells health, personal care, and beauty care products while also incorporating consultation, testing, and vaccination services as part of its offering.
The firm had in 2022 said that it was targeting expanding its footprint in Kenya and Uganda to 250 outlets by end of this year from 96 stores at the time.
CFAO has set sights on penetrating lucrative pharmaceutical markets across Africa whose value is estimated at $20 billion (Sh2.59 trillion), arguing that access to affordable, high-quality products remains a major challenge.
Latest financial filings show CFAO healthcare division currently generates revenues estimated at €1.9 billion (Sh256.23 billion) in Africa, employing about 3,800 workers.
“The parties further submitted that the transaction offers ACBC firm improved operational stability with a well-financed and knowledgeable strategic partner and allows it to offer an enhanced product range, enabled by the supply chain capabilities of CFAO,” the Comesa competition watchdog notes.
“The parties also submitted that the transaction is expected to yield substantial economic benefits through enhanced supply chain capabilities enabling wider product selection, more affordable medicines, and broader market access in Kenya and Uganda.”
Healthcare has become one of the main investment areas for private equity firms in Kenya over the past decade, mainly targeting pharmacy chains and private hospitals.
The firms are attracted by the rising demand for quality healthcare services in a country where public healthcare remains wanting.
In 2013, for example, Kenyan-based investment fund Fanisi Capital took up a majority stake in Haltons Pharmacy for $3 million (Sh388.50 million under prevailing rates) before offloading it to Ghanaian prescription drugs company mPharma for $5 million (Sh647.5 million under current rates) in 2019.
