Medellin’s Éxito Purchases Grupo Pão de Açúcar in Brasil, Libertad in Argentina; Now Largest Retailer In South America

Last week, Medellin based Grupo Éxito has entered into a share purchase agreement with Casino regarding the acquisitions in cash of a 50% stake in the holding company of 99.9% the ordinary voting shares of Grupo Pão de Açúcar, representing 18,8% of the total capital, along with consolidation rights to the operation, and a 100% stake in Argentina’s “Libertad” retailer.

The transaction will enable Grupo Éxito to consolidate as the operational platform of Casino Group in South America (Colombia, Brasil, Argentina and Uruguay) and will position Éxito as the leading South American retail group, and the largest Colombian retailers based on sales. Grupo Éxito, which also operates in Colombia under the upscale Carulla and discount Surtimax brands, will reach a population of over 280 million people in the largest economies of the continent.

Carlos Mario Giraldo Moreno, Grupo Éxito CEO

“As we set out in our strategic definition, we are now making real the idea of having a “multi-Latino” Grupo Éxito together with the management of Grupo Pao de Açúcar. We love the challenge of becoming the largest retail company in South America and will work to achieve the proposed results and continue our expansion. The customer will remain at the center of the Organization in each country in which we operate,” said Carlos Mario Giraldo Moreno, Grupo Éxito CEO.

There will be no change in the management structure of GPA as a result of this transaction. Rothschild & Cie was the common financial advisor for Grupo Éxito and the Casino Group. Bank of America Merrill Lynch provided a fairness opinion to the Board of Directors of Éxito that, “as of the date thereof, and subject to the analyses, assumptions, limitations and qualifications thereof, the Aggregate Consideration to be paid by Éxito in the transaction is fair, from a financial point of view, to Éxito.”

• Total Deal Value: USD$1,826 million.
• After consolidating revenues from Brasil and Argentina, Grupo Éxito will book sales of over USD $33 billion/ COP $67.2 Billion (2014) and a leadership position in four countries: Brasil, Colombia, Argentina, and Uruguay, representing 75% of the population of the region.
• Grupo Pão de Açúcar has 2,143 stores in Brasil. It is the #1 food, #2 e-commerce vendor in the 5th largest country in the world, and #1 in South America. Its sales reached USD $27.8 billion / COP $55 Billion in 2014.
• Libertad has 27 stores in Argentina and is a leading food retailer in the region of Córdoba, with sales of USD $495 million / COP $0.99 Billion in 2014.
• Éxito purchases the shares from its own parent company, France based Casino.
• The move is seen as defensive by Casino, as Brasil’s economy slows.
• Casino owns 54.8% of Éxito

Éxito’s controlling shareholder, Casino, Guichard-Perrachon, has indicated that it may acquire additional shares in its Latin American subsidiaries in the coming months, depending on market conditions. Casino Group, which owns 54.8% of Éxito, will remain its controlling shareholder and will keep fully consolidating its subsidiaries Éxito and GPA. Éxito will finance the transaction by using part of its existing available cash and new credit facilities provided by several Colombian and international banks.

The deal, which consists of a parent essentially selling one subsidiary to another, has raised eyebrows among analysts, as it “pushes some cash directly from the international businesses into France and it moves some of the debt out of France into Latin America, much closer to the source of the cash generation,” Bernstein analysts told Reuters. Brasil’s economy continues to struggle, and while the market potential remains huge over the long term, this deal does place Éxito as a risk buffer between GPA and Casino. If GPA sales fall off, it will most directly affect Éxito.