Casino Guichard-Perrachon SA (CO) stepped up a battle with French rival Carrefour SA for control of its Brazilian venture by buying more shares in the business.
France’s second-biggest grocer bought 6.2 percent of Cia. Brasileira de Distribuicao Grupo Pao de Acucar, bringing its overall stake to 43.1 percent of the retailer, according to a letter received by Pao de Acucar and sent to Brazil’s securities regulator yesterday. Casino of Saint-Etienne, France, today announced a plan to consolidate businesses in Latin America.
Casino is gearing up for a fight after Pao de Acucar’s chairman and shareholder Banco BTG Pactual SA approached Carrefour this week to propose combining the companies’ operations in Brazil to create the country’s largest retailer. Casino decried the proposal as a “long-standing illegal planned financial transaction.”
“This is a battle,” said Laurence Hofmann, an analyst at Oddo in Paris with a “buy” rating on Casino and “neutral” on Carrefour. “A bigger stake reinforces Casino’s position in the negotiations.”
Casino rose as much as 0.8 percent to 65.09 euros and traded at 64.73 euros at 12:35 p.m. in Paris. Carrefour fell 41 cents, or 1.4 percent, to 27.71 euros. Pao de Acucar fell 3.1 percent yesterday in Sao Paolo after advancing 13 percent a day earlier, when the Carrefour proposal was first unveiled.
Board Meeting
The proposal threatens Casino’s ability to operate in Brazil because it puts Carrefour’s assets there in play, which might entice Wal-Mart Stores Inc. (WMT) to attempt to merge its operations with Carrefour’s there, Sanford C. Bernstein analyst Christopher Hogbin wrote in a note today.
Casino, which gets a quarter of sales from Latin America, said the interests of its shareholders “seem threatened” by the proposal to Carrefour. Brazil is among the emerging countries that are helping offset falling earnings at home. Carrefour has said its board will review the proposed transaction. The company’s directors will meet today or tomorrow to discuss it, French dailyLes Echos reported today.
Helene Saint-Raymond, a spokeswoman for Carrefour, said the company never comments on the scheduling of board meetings.
“Casino has the advantage over the merger proposal, and they’ll oppose Carrefour taking control in the new company that would be created,” Jean-Marie L’Home, an analyst at Aurel, wrote in a note to investors today. Casino may gain a controlling stake in Pao de Acucar next year as part of its original shareholder agreement for the venture.
Disco and Devoto
Casino in a statement today said its Exito unit in Colombia plans to raise as much as $1.4 billion by selling new shares to finance expansion. Exito will buy Casino’s majority stakes in Uruguayan retailers Disco and Devoto for $746 million. The move isn’t related to the developments in Brazil, the company said.
Casino said it intends to maintain control over Exito by buying enough shares in the capital increase to maintain its stake at 54.8 percent. The transaction is expected to boost Exito’s earnings per share from the first year and not impact Casino’s.
“The combination of Exito with Disco and Devoto will strengthen the integration of two companies operating in countries with strong linguistic and cultural similarities,” the French company said in the statement. “It will allow the generation of synergies, which have not been possible so long as the companies were operated separately.”
Casino said the merged companies will expand in Spanish- speaking Latin America.
Disco and Devoto operate 53 stores in Uruguay, and have the biggest market share in the “modern food distribution market” in that country, according to Casino. Exito will use the funds raised to renovate stores, add new formats, expand in medium- sized cities and fund acquisitions in the region.
A merger of Sao Paolo-based Pao de Acucar with Carrefour’s local unit may open international markets for products exported by Brazil, the country’s trade and development minister Fernando Pimentel said yesterday in Brasilia. The company would have 25 percent to 27 percent of the domestic food market, he said.
Bloomberg.
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