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Summary of Project Information (SPI)

This Summary of Project Information is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.
Project number11686
Project nameLaboratorio Fleury
SectorHospitals and Clinics
Company nameFleury S/A.
Environmental categoryB
Date SPI disclosedFebruary 11, 2004
Projected board dateMarch 18, 2004
Previous EventsSigned: May 12, 2004
Approved: April 23, 2004

Description of company and purpose of project
Centro de Medicina Diagnóstica (Fleury or the company), one of the leading Brazilian clinical laboratory testing and diagnostic imaging service provider, operating mostly in metropolitan São Paulo, is undertaking an expansion and modernization program. The project includes:

- an ambulatory surgery center (a day hospital) in São Paulo;
- an equity investment in NKB, a company set up to acquire clinical laboratories;
- a diagnostic center in South São Paulo;
- a new collection and diagnostic center in Higienopolis, São Paulo;
- on-going investments to maintain and upgrade existing operations; and
- additional working capital.

Project sponsor and major shareholders of project company
Fleury was founded in 1926 by Dr. Gastão Fleury da Silveira and Dr. Walter Sidney Pereira Lester to provide clinical laboratory testing in the city of São Paulo. Currently, Fleury is owned by 19 physicians, and is organized as a stock company ( S.A. - "Sociedade Anonima").

Fleury has entered into a 80:20 partnership with Brasil Memorial to set up an ambulatory surgery center in São Paulo. Brasil Memorial is a pioneer in Brazil in the field of ambulatory surgery centers and has successfully established and managed such centers in Salvador, Bahia and other Brazilian cities. Brasil Memorial will provide expertise to the project through an Executive Director.

In 2002, Fleury created a new 57% subsidiary, NKB, to acquire, modernize and consolidate laboratories with a view to create synergies, add value and expand markets. NKB identified and acquired 4 clinical laboratories, with a total of 60 collection centers in Rio de Janeiro. The former owners of the laboratories have a combined shareholding of about 40% in NKB.

Total project cost and proposed IFC investment
The total project cost is $60.4 million for five-year investment program (Fleury II) which includes:

- $2 million for an ambulatory surgery center (a day hospital) in São Paulo;
- $8.5 million to acquire existing clinical laboratories;
- $16 million to build a diagnostic center in South São Paulo;
- $5 million for a new collection and diagnostic center (CDC) in Higienopolis;
- $27 for on-going investments to maintain its existing operations; and
- $3 million for additional working capital.

The IFC Investment is up to $20 million A loan.

Location of project and description of site
Fleury’s headquarters and its central testing facility are in Jabaquara in the city of São Paulo. It also operates 17 Collection & Diagnostic Centers (CDC) in Brazil.

The project involves the following components:

- setting an ambulatory center in Higienoplois in the city of São Paulo;
- a new CDC also in Higienoplois in São Paulo;
- a flagship diagnostic center to be located in South São Paulo city;
- acquisition of small laboratories in locations outside the city of São Paulo beginning with Rio de Janeiro; and
- ongoing maintenance capital expenditure for the existing the existing 13 CDCs in the metropolitan area of São Paulo and 4 CDCs outside the city of São Paulo.

Project Development Impact and IFC's Role
Development Impact: The proposed project will enable Fleury to expand the volume and scope of its operations. By acquiring (and renovating) existing laboratories, Fleury will bring its high-quality services to lower-income groups in a larger geographical area, thus widening access to reliable clinical laboratory testing. It will also raise what are considered acceptable standards in the sub-sector. In addition, by reorganizing, integrating and better managing the acquired laboratories, Fleury will set an example of efficient business practice. Combining cost control/reduction with high quality services will set an important precedent in the health care sector. The establishment of a greenfield ambulatory facility, which meets Fleury’s quality standards, will also widen access to excellent medical care. Finally, the project will enable Fleury to expand its physician and public education programs.

Fleury's most important developmental impact is its demonstration effect as a leader in the area of clinical laboratory services in Brazil and in South America. In addition to its full compliance with all local regulations, ISO 9002 certification for quality requirements, ISO 14001 for environmental management, the company is now in the process of obtaining certification from the American Academy of Clinical Pathology, which will confirm Fleury's highest standards of quality.

Fleury continues to expand its role in improving quality standards in the industry. It has also supported the advancement of Brazilian research in the international arena. A number of original research findings from Fleury have been presented at scientific conferences and published in internationally reputable journals.

IFC Role: Long-term financing is essential given the nature of this project. Brazilian banks are not an efficient conduit for long term private sector lending, and the development of a corporate bond market is stalled. Brazil has historically been plagued with high real interest rates. IFC is the one of the few institutions which are able to provide long-term financing at reasonable rates with an adequate grace period. IFC also participated successfully in an earlier investment with Fleury. The success of this investment will demonstrate to more conservative investors that it is possible to successfully invest long-term in the health care sector in Brazil.

Environmental and social issues - Category B
This is a category B project according to IFC’s environmental and social review procedure. The key environmental and social issues associated with this project include: environmental management capacity for the new day hospital, diagnostic centers, as well as the existing laboratories to be acquired; selection criteria for acquisition of additional existing laboratories (site environmental and social conditions), environmental impacts related to transport of medical samples, additional environmental capacity to handle the upgrade of the existing Fleury operations, handling and disposal of medical materials including bio-hazardous wastes, liquid waste treatment and disposal, air emissions from boilers and incinerators from boilers and incinerators, solid waste treatment and disposal, employee exposure to toxic and/or radioactive materials, employee health and safety training, CFCs, power and water supply, and fire protection. As part of that project, Fleury will be required to upgrade/improve its operations as needed to comply with the applicable World Bank guidelines and policies.

To view the environmental documents for this project, click here

Location of environmental documents in locally affected community
The environmental documents will be made available at the following locations:
Fleury head office in São Paulo; and its existing diagnostic and laboratory centers.

Address of Head Office:

Fleury – Centro de Medicina Diagnóstica
Av. Gal. Waldomira de Lima, 508
04344-070 – Jabaquara – São Paulo – SP
Phone – (5511) 5014-7270
Fax – (5511) 5014 - 7425

To contact the project company, please write to:

Mr. Claudio M. Marote Jr., Chief Financial Officer
Fleury – Centro de Medicina Diagnóstica
Av. Gal. Waldomira de Lima, 508
04344-070 – Jabaquara – Sao Paulo – SP
Phone – (5511) 5014-7270
Fax – (5511) 5014 - 7425

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