Chile-based asset management firm Linzor Capital Partners, which acquired the Farmashop chain of 92 stores last year, announced at the weekend that it has instructed international counsel for the dispute.
The investors seek to challenge a decree signed by President José Mujica last November that prevents an individual or company from owning more than 15 pharmacies in the country. The decree also prohibits the use of distribution centres and call centres, internet sales, and the registration of proprietary brands.
The government says chains such as Farmashop that already own more than 15 stores will not be required to divest those assets but will be prevented from acquiring any more.
Linzor’s managing partner, Tim Purcell, said in March that the measures have “almost completely destroyed the value of our investment” and amounted to expropriation without compensation. The private equity firm had planned to expand Farmashop to 130 stores.
Purcell suggested the claim might be brought under Uruguay’s bilateral investment treaties with Canada and Spain. A trigger letter is understood to have been filed last December.
Farmashop and another drug retailer – San Roque, which owns 35 stores in Uruguay – have also sought to challenge the constitutionality of the decree in the local courts. An application with Uruguay’s Contentious-Administrative Tribunal was filed last month.
Linzor has instructed Latham & Watkins LLP partner Fernando Mantilla-Serranoto lead the work on the case, along with co-counsel from Marval, O'Farrell & Mairal in Buenos Aires. They will work alongside Uruguayan firm FERRERE, which advised Linzor on its acquisition of Farmashop last year and are also representing the chain in the administrative proceedings.