TTR Dealmaker Q&A – Sergio Michelsen (Brigard & Urrutia)

TTR Dealmaker Q&A

September, 2015

Almacenes Éxito acquires 50% stake in Ségisor and 100% of Libertad

USD 1.86bn

Sergio Michelsen
Brigard & Urrutia

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Sergio Michelsen, a partner at Brigard & Urrutia in Bogotá, led the Colombian legal team that advised Casino Groupe on its sale of a 50% stake in France-based Ségisor, thecontrolling entity of GPA in Brazil, and a 100% stake in Argentina-based Libertad to Colombia’s largest retailer, Almacenes Éxito, for USD 1.86bn


Q: What was each party seeking to accomplish in this transaction?

A: In the case of Éxito, it had committed to regional expansion and thus this acquisition enables it to become a true “multilatina” and comply with such commitment. In the case of Casino, it can unify the management under Éxito and ensure that the companies in the four countries of South America where it has a presence, Brazil, Colombia, Argentina and Uruguay, extract all the synergies as well.

Q: How did Brigard & Urrutia land this mandate?

A: We have been advising Casino with all its Colombian and other Latin American business for almost 20 years. We initially advised Casino when it acquired a 25% stake in Éxito and a year after when it acquired a controlling interest in Cativen in Venezuela. Subsequently, several years after, the Venezuelan government nationalized Cativen and we advised Casino on the implications that such event would have on its Colombian operations. In the meantime, we advised Casino on its consolidation of control in Éxito. We have also advised Éxito, particularly in connection with the acquisition of the second-largest retail company in Colombia, Carulla, and last year in the acquisition of another large retailer, Super Inter. More recently we advised Casino on the sale of its participation in the leading retail company in Uruguay, which was also sold to Éxito.

Q: What did this transaction entail in terms of resource allocation?

A: We had the M&A practice group primarily involved with the support of our corporate, capital markets and tax practice groups. We also coordinated closely with French, Brazilian and Argentine counsel.

Q: What made this deal unique from other transactions Brigard has advised on?

A: Since this was a related party transaction, we were very keen on making sure that the transaction fully complied with Colombian law and good corporate governance practices. To such effect, counsel to Casino and Éxito negotiated on an arm’s length basis, further ensuring that the transaction would be beneficial to all parties involved. As an example, the transaction was approved by Éxito’s non-conflicted board members and by its shareholders assembly. The parties engaged independent advisors, provided all the shareholders with the relevant information and Éxito further obtained a fairness opinion from Merrill Lynch. In this respect I would say that this was not the typical deal where you look after the specific interest of your client, but rather we had to consider the interest of all parties involved.

Q: In what ways does this transaction advance Éxito’s regionalization program?

A: Éxito now has a stake in Brazil’s largest retailer, Pão de Açúcar, as well as in interesting retailers in Uruguay and Argentina. In terms of sales, Éxito will be the largest company in Colombia in terms of sales and can now be called a true “multilatina” with its stake in in Brazil’s largest retailer, the largest in Uruguay, and in Libertad in Argentina.

Q: How will the transaction impact Éxito’s profile as a potential target for the likes of Wal-Mart?

A: I do not believe that Exito is within Wal-mart’s plans or that its shareholders want to sell the company. However, Éxito has expanded its footprint in a very significant way and this should make it very appealing to any global retailer. By being the leading retailer in Brazil, Colombia and Uruguay with a significant presence in Argentina, Éxito becomes the leading retailer in South America.

Q: What other transactions do you expect to stem from this deal?

A: Now that Éxito is a leading retailer in the region, whenever an opportunity arises it will be called to the table. In Central America, the retail market can be expected to consolidate, while in Chile and Peru consolidation will also happen, though it could take longer given the fact that the Chilean retailers are already entrenched. Éxito will be in a position to seek those opportunities when they arise. I would say consolidation is certainly going to occur in Central America where Wal-Mart has quite an advantage. The smaller forces are coming together and the logical next step would be selling to a larger regional player, and at that point Éxito would be very well positioned to do an acquisition. In Chile it’s different, it’ll take much longer. In Peru that’s going to take longer as well, but eventually those two markets should be consolidated.

Q: To what extent has Éxito demonstrated an appetite for the wholesale club format?

A: I haven’t heard that much discussion in this context; I’ve seen more of an interest in e-retail. In that respect, Pão de Açúcar is the leader in Brazil and Casino also has its own platform with C-Discount. The synergies among the members of the group will ensure that e-retail will be quickly deployed in the countries where they have a presence. A couple of years ago I read an interview with the CEO of Wal-Mart when he was asked, “Who is your biggest competitor?” He immediately said Amazon. While Amazon has just a fraction of the sales of the big global retailers, it is clearly a leader in the e-retail business and thus a company to watch. Therefore, leapfrogging from the traditional retail to e-retail seems a very logical path and in this respect the transaction will add substantial value by taking advantage of a very good e-commerce platform in Brazil that can be applied to other regional markets.


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