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Rey Holding acquires Farmacias Metro 

August 31, 2011

On the morning of yesterday August 30, the Rey Holding, which owns the chain Supermercados Rey, conducted a transaction whereby it acquired the operations of the Farmacias Metro.

Rey Holding also acquired in this transaction operations Econo Farmacias.

Farmacias Metro began operations in 1991 with the opening of its first branch in Betania (in Panama City) and with just 15 employees. Since then the business has expanded considerably and now has 16 branches in Panama City and a branch in Chitre, and more than 400 employees. The pharmacy chain not only offers traditional medicines such as pharmacies, but also a variety of many other products. In recent times, has expanded its offering to provide, in addition to medicines and also health services such as laboratory and optical services.

The transaction amount was not disclosed. Nicholas Psychoyos, president of Rey Holding, and René Rey Diaz, President of Empresas Metro said only that the transaction took place through the purchase of all shares of Empresas Metro, S.A., which owns both chains of pharmacies.

Psychoyos Nicholas says that the integration of Farmacias Metro and Rey Holding operations will lead to synergies, as well as new opportunities and offers both for customers and employees of the five strings containing Supermercados Rey, Mr. Price , Romero Supermarkets, Farmacias Metro. Psychoyos explains that this union will form a stronger and more competitive organization that will reaffirm leadership of their products and services in market segments.

Rey Holding President Explains strategy is to further develop and strengthen brands and Metro and Econo Farmacias, so that the transaction does not involve significant changes to suppliers, customers and partners. Rey Holding said that values tradition and history of Metro and Econo Farmacias in the country as well as the positioning of their brands and their experience, and that this will strengthen both businesses complement each other. According to Psychoyos this consolidation offers a complementary totaling one hundred year history of the King Group with the knowledge and expertise offered by Metro and Econo Farmacias, and strengthens both businesses through the sum of experiences, management skills and security best practices that will result in benefits for customers, employees and shareholders.

According to the regulations of Panama competition an acquisition or merger must go through a preflight the ACODECO (the competition authority) for approval. However, the regulation is not mandatory, meaning that companies are not required to submit an application for approval preflight ACODECO before, but in the case that after the acquisition or merger is government agency determines that the acquisition or merger adversely affects competition, then ACODECO can roll back the transaction. In the case of this acquisition is not known to have submitted such a request before the ACODECO, because that govermental agency has not issued any resolution on it.

Rey Holding has in each of its stores a pharmacy and now acquired Metro and Econo Farmacias. That is, there has been a concentration of drug stores and this is precisely what may be checking ACODECO. Specifically, could be verified that this concentration does not adversely affect free competition.

In this sense it is possible to see the way ex-post checking ACODECO acquisition. In fact, these ex-post checks are routine procedures of ACODECO, and which we have seen them perform many times since the law was created in the early nineties.

However, the verdict should be favorable because the pharmacy market is highly competitive. The main competitor of the chain Farmacias Metr is the Farmacias Arrocha, which has 14 branches in Panama City and one in David, Province of Chiriqui. In addition to this major competitor, each supermarket chain also has a pharmacy and same products, similar or substitute who sell each chain of pharmacies. There is also a fairly large number of other pharmacies scattered around Panama City that are not part of a chain pharmacy or supermarket.

There is no known precedent for a reversal of a concentration that the Competition Act was enacted in the nineties. Until now companies have focused without going through a preflight the ACODECO have not had any problems.

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