Cade's technical body has recommended that Extrafarma sells around 3% of its stores to eliminate competition concerns, the company added. The agreement needs to be voted by Cade councillors by September, the securities filing said.

Pague Menos' Chief Financial Officer Luiz Novais said in an interview with Reuters the completion of Extrafarma's acquisition, with more than 350 stores after the divestiture ordered by Cade, will accelerate the chain's growth.

"The acquisition would be equivalent to three years of organic growth", Novais added, noting that Pague Menos will open around 120 stores this year.

Pague Menos will pay half of the 700 million reais ($138 million) deal to Extrafarma owner, Ultrapar Participacoes SA after Cade's approval. The remainder will be paid in two years. Novais said Pague Menos will pay for the acquisition with its cash flow.

($1 = 5.0776 reais)

(Reporting by Tatiana Bautzer, Editing by Louise Heavens)