INTERVIEW: DARÍO LAGUADO GIRALDO – BRIGARD & URRUTIA ABOGADOS

Darío Laguado Giraldo

Partner at 
Brigard & Urrutia Abogados

 

How would you describe the mergers and acquisitions activity in Latin America for the first 5 months of the year? And in Colombia?

Generally speaking, and observing the trends in the medium term, the M&A activity in Colombia and the region has experienced an important growth in the past years. In Colombia, the first months of 2017 seem to correspond to what one could denominate a preparation period. That is, we perceived a number of transactions in an early planning and preparation phase. Even though there are many variables contributing to this situation, our general reading is that certain uncertainties that were prominent last year (mainly the peace treaty and the tax reform)have now come to resolution. Many of these transactions are already advancing and we are expecting an important acceleration for the second semester of the year.

 

As a mergers and acquisitions expert, which sector of the Latin-American economy do you thing are more interesting for regional and/or foreign?And in the case of Colombian Economy?

There are several sectors of the economy that raise the interest of regional and foreign investors. Historically, investors have expressed their interest in large infrastructure assets, telecommunications, oil and gas and the financial sectors. In this context, we have recently seen increasing interest in the insurance industry and a re-awakening of the oil and gas industry. Furthermore, project M&A is also rising since 4G infrastructure projects are attracting investors that seek to participate in projects that have already been adjudicated.

Notwithstanding the above, we are currently navigating a new M&A wave in which, among others, it is worth highlighting four big trends that have broadened the scope in this area. On the one hand, there is increasing interest in consumer goods,which is correlated with the growth of the middle class and the disposable income of the population. Several industries can be included in this trend, among which we find the health industry, covering all the productive chain, from healthcare providers, to drugstores and pharmacies. Something similar is happening in the food industry, where vertical integration and aggregation seem to be a big trend. Lastly, we have seen general interest in consumer goods,including an assortment of industries like fitness centers, clothing and accessories, and pet food, among others.

On the other hand, private equity funds have become an important driving force for M&A activity. There is currently a good number of local and foreign funds in Colombia, investing in companies ofdifferent sizes andin multiple industries. Another important trend is related to “multilatinas”, which are currently very active in the region. In Colombia, we have somesalient examples of companies that have made important acquisitions in other countries in the region and have become regional and even global players competing with some of the main actors world-wide.We have seen this in the financial industry,in the insurance and pensions industry, in infrastructure and in the food industry. Lastly, we are noticing an increase in thedomestic market, with transactions in which both parties are essentially local without any involvement of foreign investors.

 

Do you believe the Colombian M&A market has growth potential as currently structured, or do you think reforms are necessary to increase development?

I have no doubt of the potential for growth of the Colombian market. In the last years, several legal reforms have been enacted to favor the M&A activity, such as reforms in the private equity sector, reforms lifting restrictions for financial entities to grant loans for the acquisition of companies, and, in general, reforms that facilitate business in the country.

In general terms, there are no barriers to enter the M&A market.   Except for a very few exceptions, there are no nationality requirements in connection with the property or management of local companies. Also, except for someregulated industries, there are no minimum capital rules, restrictions to the repatriation of capital or governmental authorizations to conduct business or acquire a company.

All in all, even though there are legal adjustments that may be desirable, the legal infrastructure in Colombia is friendly to foreign investment and, particularly, the M&A activity.

 

You worked for three years as an M&A advisor in New York. Are there differences when approaching operations between Latin-American and USA companies? What about the advice offered? 

Markets are more intensely interconnected than ever, which explains why the U.S. M&A technique has been transplanted to Latin America. This is reflected in the fact that the procedures and the legal documents used in the region are very similar to those used in the U.S. and, in general, other jurisdictions that are more active in M&A. This includes, for example, the legal due diligence process,where there are no major differences. Something similar can be said about the agreements used to implement a transaction, like the share purchase agreement or the shareholders’ agreement. A foreign investor can expect these documents to be assembled similarly, and to regulate essentially the same issues that such investor would find in a jurisdiction like the state of New York (adjusted, of course, to local regulations).

Having said that, it is also true that there are subtle but important differences in the advice given to Latin American companies in M&A transactions. A lot of companies in the region are family businesses, so it is reasonable to expect more participation from the family members in the fundamental decisions, and that the negotiation process be more personal and, sometimes, more intense. Also, concepts or figures that are standard in other jurisdictions may be inadequate for local companies,demanding advisors to “translate” them to fit the local context, and a good doses of creativity to achieve the same results through the appropriate means in the relevant jurisdiction.  Lastly, size is a determining factor. Transactions in Latin America tend to be smaller, which curiously does not imply they are simpler; quite the opposite these transactions maybe more complex since issues that could be irrelevant in a larger operation may become material or even deal breakers.

Undoubtfully, all of the above demands knowing the idiosyncrasy of the relevant country and the particularities of the local actors participating in the transaction.

 

Speaking of the United States, how do you think Trump’s protectionist approach before Latin America may affect the regional market?

It is still too soon to know how the “Trump effect” will affect the M&A market in Latin America. Without question, his protectionist policies demand prudence from investors. Nonetheless, except perhaps for Mexico, Latin America does not seem to be high enough in Trump’s political agenda and there are valid reasons to think that the business logic will prevail and that the region will continue to attract investors from the United States.  In fact, in a recent trip to Mexico, colleagues from other firms mentioned to me that even though there was anxiety during the first two months of the year, the markets reacted quickly and currently the M&A activity in Mexico does not seem to have been affected by Trump´s policies.

The negative effects, if any, may be compensated with investment from other countries (apart from countries that have traditionally set eyes in the region, China has given clear signs of interest and it seems like it is only a matter of time before it becomes an important actor), and by the strengthening of the local and regional markets.

TTR Dealmaker Q&A with Felipe Creazzo – K&L Gates

Felipe Creazzo

Partner at
K&L Gates


Arvato Bertelsmann takes controlling stake in Intervalor

On 29 March, Guetersloh, Germany-based Arvato Bertelsmann increased its equity interest in São Paulo-based credit collections firm Intervalor to 81.5% following its initial 40% acquisition in June 2015. K&L Gates Partner Felipe Creazzo led the international legal team advising the buyer after having advised in the prior transaction.

Q: How did K&L Gates land the mandate to advise Arvato Bertelsmann?

A: I advised it on its initial 40% stake acquisition in 2015. It was a natural choice for the client to rely again on me at K&L Gates for the follow-on deal in view of my experience with the structure, with several of the commercial and business aspects related to the acquisition and with internal policies that needed to be reflected on the transaction documents. These aspects streamlined the transaction and made it more cost efficient. Needless to say, a local firm was needed to carry out local due diligence and make sure all the commercial aspects were properly reflected on the documents and complied with local law. Lobo & de Rizzo, the firm I was previously a partner with, which was involved in the first deal, was the appropriate choice. While I’ve left Lobo & de Rizzo Advogados, I have good friends there, very fine and seasoned M&A lawyers among them, and look forward to other opportunities to work together.

Q: How did the fact that you’d worked with this client shape your approach in this most recent transaction?

A: Although my Brazilian admission is properly suspended with the Brazilian Bar as I practice foreign law only, the client greatly benefited from my broader perspective of the transaction as a dual-admitted lawyer. My coordination of the local firm’s involvement ensured that all local law compliance was in place on an optimized and cost efficient manner. Since I’ve been on both sides, I can work with local firms effectively and also become a direct channel of information to the client with respect to many of the local law aspects that would normally take time to be digested. In an international capacity, it’s easier for me to reflect the clients’ business needs into the agreement.

Q: To what extent did Brazil’s current recession play a role in the timing of this deal?

A: Intervalor is a financial services provider in Brazil and one of its core activities is collection services. It’s an active moment for that type of industry in Brazil. Also, there’s a part of the business that includes the promotion of credit products that can be expected to recover significantly in the near future. This transaction was not based on a short-term perspective for Arvato Bertelsmann. It was generally a good moment to invest and to benefit from both still low prices and a more beneficial currency exchange rate.

Q: To what extent is the follow-on deal a reflection of achieving pre-established benchmarks?

A: The follow-on acquisition was the result of convenience and negotiation, but there were in fact opportunities for changing shareholding percentages that could materialize sooner or later based on the terms of the prior agreement. For this deal, it all came together as a result of friendly conversations among the shareholders. Everyone was happy with the progress made since the initial entry, and there was a lot of synergy and systems were being successfully integrated. There’s already a new face to the company. Becoming part of an international group is going to be beneficial to every stakeholder, from management to employees to shareholders. There’s an enormous positive vibration to this deal.

Q: Why was Intervalor the right stepping-stone into Latin America?

A: Brazil is not for the weak of heart, it’s a tough market to crack. Doing business here, by far the largest economy in Latin America, provides any foreign investor with useful tools not only to do business here, but also to succeed in other Latin American markets. It doesn’t necessarily mean that if something works here it will work in Chile or Argentina, but it does help starting with Brazil. The size of the market here in Brazil, as compared to other Latin American markets, was also an important factor.

Q: What made this deal stand out among other M&A transactions you’ve advised on?

A: It was a particularly complex deal. In terms of legal documentation, there was a prior acquisition arrangement in effect that had to subsist. Matching this new acquisition in 2017 with the previous one was hard work from a legal perspective, in every aspect of the transaction documents.

ENTREVISTA CON JAIME ROBLEDO – GÓMEZ-PINZÓN ZULETA ABOGADOS

Jaime Robledo

Partner en
Gómez-Pinzón Zuleta Abogados

El mercado transaccional latinoamericano finalizó el año 2016 con registros superiores a los de 2015, pese a la situación política delicada de muchos de sus países. ¿Qué circunstancias cree que explican esta situación? ¿Qué podemos esperar para 2017 viendo el transcurrir de los primeros meses del año? 

En Colombia el volumen de fusiones y adquisiciones se mantuvo en niveles aceptables. Si bien no llegó a los niveles alcanzados en otros años anteriores, especialmente si se mira en términos de valores en dólares, hubo una importante actividad durante el año. Transacciones tales como la enajenación del 56% de Isagen por parte del Gobierno Colombiano a Brookfield por un monto de US$2 billones, la venta de Exxon Mobil de sus activos del downstream en Colombia, Perú y Ecuador  a COPEC por US$787mm y la venta de varios bancos a Transunion de aproximadamente el 100% de las acciones de CIFIN S.A. Son algunos de los ejemplos pero obviamente hay más.

Estas transacciones demuestran, cada una, razones distintas de entrada al mercado colombiano.

– Se ha desarrollado un importante mercado de M&A sur-sur. Hay gran interés de compañías chilenas o brasileñas o mexicanas en penetrar el mercado colombiano y el andino en general. Siendo Colombia y Perú los de mayor escala y clima político, los inversionistas los prefieren sobre Ecuador y, por obvias razones, Venezuela. La transacción de Exxon y COPEC es un ejemplo de la consolidación de un jugador regional en su área de industria.

– Dada la reciente devaluación del peso frente al dólar y en general de las monedas andinas y latinoamericanas frente al dólar estadounidense se presenta un fenómeno de abaratamiento de los activos en países como Colombia. En esa medida, así sea una economía menos dinámica que antes, los inversionistas siempre prefieren comprar barato y seguramente ven oportunidades de compra a precios bajos por el fenómeno revaluacionista.

– Colombia y otros países de Latinoamérica se han convertido en mercados relevantes -quizás no indispensables pero si relevantes- a nivel mundial. En esa medida, compradores estratégicos (ej. Transunion o Copec o el mismo Brookfield) ven la necesidad de tener presencia en esos mercados. Siendo así, los activos adquieren cierto valor de escasez (scarcity value). Se vuelven, como lo dice el conocido refrán, “la última Coca Cola del desierto.” De esa manera inversionistas estratégicos están dispuestos a adquirir incluso ante perspectivas económicas sombrías.

 

La elección de Donald Trump como presidente de los Estados Unidos coloca a México, en primer lugar, pero también a Latinoamérica, en una situación complicada, puesto que este país es el principal socio en términos de fusiones y adquisiciones de la región. ¿Cree usted que la situación puede ser una oportunidad para Latinoamérica de desarrollar en mayor medida su mercado local? 

Es una buena pregunta. En un principio parecería que la aproximación inward looking de Trump lo que generará es un robustecimiento de las compañías estadounidenses, especialmente las industriales. Es incierto si al estar la economía estadounidense más fuerte, ello resulte en un incremento en la actividad de fusiones y adquisiciones por parte de las compañías americanas hacia Latinoamérica. Muy seguramente un fortalecimiento de la economía americana fortalecería a su vez el dólar y por ende abarataría los activos locales.

En paralelo consideramos que el mercado local – tanto el puramente doméstico en Colombia como el regional referido a transacciones intra regionales- continuará desarrollándose. Al respecto vemos potencial actividad en:

(i) adquisiciones por parte de jugadores puramente locales como la forma de expandirse en sus mercados nacionales mediante la adquisición de pequeñas y medianas compañías que comienzan a incursionar en líneas de negocio que pueden resultar accesorias o complementarias a las del gran jugador local.

(ii) continuación de consolidaciones regionales por parte de multilatinas que quieren ingresar a otros mercados. En el caso de Colombia, las multilatinas buscan acceso a mercados como Chile, Perú, Brasil, Argentina y varias jurisdicciones en Centro América tales como Costa Rica, Nicaragua y Guatemala.

(iii) enajenaciones por parte de fondos de capital privado locales y regionales que han cumplido su horizonte de inversión y desean salir a vender sus activos. Al respecto es importante recordar que los FCP en Colombia se encuentran – en la mayoría de los casos – en la etapa de maduración y gestión de sus primeras inversiones, no habiendo pasado aún por el ciclo de divestitures o enajenaciones para monetizar la inversión. Esto debería suceder más temprano que tarde. Un inconveniente importante para estas enajenaciones será el diferencial de tasa de cambio al que entraron estos inversionistas, comparado con la tasa de cambio hoy, haciendo que una compañía cuyos ingresos no estén dolarizados, muy seguramente haya tenido una tasa interna de retorno inferior a lo requerido por el fondo de capital privado. Esto último podría demorar estas enajenaciones.

(iv) compras por parte de FCPs locales y regionales de compañías del medio mercado (mid-market) cuyos precios oscilan entre los US$50 y US$150 millones.

(V) adquisiciones de compañías proyecto que sean adjudicatarias de proyectos de infraestructura – generalmente vial – o adquisiciones parciales de porciones minoritarias en estas.

 

En términos más locales, el importe de las operaciones registradas en Colombia durante 2016 experimentó un gran incremento, tendencia que parece prolongarse durante los primeros meses de 2017. ¿Cree que esta situación es coyuntural o se ha incrementado el apetito inversor por el país? 

Las consideraciones acerca del buen precio de los activos y el apetito de consolidaciones regionales deben ser tenidas en cuenta para esta respuesta.

 

¿Qué sectores de actividad diría usted que van a ser importantes en este 2017 en Colombia? ¿Por qué? 

Colombia continúa siendo un país con una importante clase media y con más de 10 ciudades que superan los 500.000 habitantes y 4 que superan el millón de habitantes. Esto, añadido al hecho de que muchos sectores de servicios o comerciales o de otro tipo no han sido desarrollados hace que haya un gran potencial de crecimiento. En las áreas en donde se ha visto importante crecimiento es en tiendas de alimentos y elementos básicos de bajo precio, servicios financieros, turismo y hoteles, entre otros.

Colombia continúa siendo un país con una importante clase media, esto, añadido al hecho de que muchos sectores no han sido desarrollados hace que haya un gran potencial de crecimiento

En cuanto a otros sectores veremos crecimiento de M&A en activos de infraestructura. Particularmente en compañías proyecto o porciones minoritarias de compañías que han sido adjudicadas proyectos de infraestructura vial de 4 G.

Está usted especializado también en operaciones en el mercado público de valores. ¿Cree que es factible que se produzca algún IPO este año en el mercado colombiano? ¿Por qué no son más frecuentes en el país este tipo de operaciones? 

Si hemos ejecutado varios IPOs. Entre ellos ISAGEN, ECOPETROL, ETB Y AVAL. Sin embargo vemos poca probabilidad de que se presenten ese tipo de transacciones este año. Si bien en el mercado colombiano podría haber una cantidad grande de liquidez para invertir en un IPO no es común que haya mucha participación en esas transacciones dado que el mercado colombiano aún no tiene la liquidez que se requiere para este tipo de transacciones. En esa medida los compradores quedan rehenes de su inversión ya que nadie la compra. Además de lo anterior, las personas que invirtieron de manera importante en IPOs en Colombia, es posible que hayan perdido  una parte considerable de lo invertido por la caída generalizada de los mercados colombianos en el último lustro.

 

TTR Dealmaker Q&A – Alan Klein ( Simpson, Thacher & Bartlett)

TTR Dealmaker Q&A

October, 2015

Owen-Illinois acquires Vitro´s glass container business

USD 2.15bn

Alan Klein
Simpson, Thacher & Bartlett

Alan Klein, co-administrative partner at Simpson, Thacher & Bartlett, led the legal team that advised Owens-Illinois in its USD 2.15bn all-cash acquisition of Vitro’s glass container business that closed on 1 September. The acquired assets include five plants in Vitro’s home market, Mexico, one in Bolivia and the seller’s distribution lines in the US.

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Q: How did Simpson, Thacher & Bartlett land this mandate?

A: We’ve worked with Owens-Illinois for over 25 years, since KKR acquired Owens-Illinois in the late 1980s. We were one of the firms involved in the acquisition and financing of that deal. I started working with Owens-Illinois in the late ‘80s and since that time have helped them with innumerable acquisitions and divestitures, as well as prospective transactions.

Q: How long was Vitro’s glass business in the sights of Owens-Illinois?

A: It’s something Owens-Illinois has been thinking about going back several decades.

Q: Why was this collection of assets attractive and strategic for the buyer?

A: It’s a natural geographic extension for Owens-Illinois because they have a strong position throughout the US, Canada and Latin America, so it’s a natural fit. It’s a natural combination from Owens-Illinois’ perspective. Vitro was a leading container and glass manufacturer in Mexico and filling that gap is something Owens-Illinois has been interested in for a long time.

Q: Why was this the right time to launch a bid?

A: It was a point in time when the buyer and the seller were able to agree on a price, which they’d never been able to do before. Vitro’s glass manufacturing business was performing well, and Owens was in a position to afford to pay the price that Vitro was looking for. There was a negotiation and they were able to reach an agreement on price.

Q: What were the obstacles to the deal closing in past attempts?

A: When one party was ready the other wasn’t, and vice versa.

Q: What made this transaction particularly challenging?

A: It’s a carve-out from the rest of Vitro’s business. My experience has been that whenever you’re buying a part of a company where the assets have been intermingled with other parts of the seller’s business, you have to sort of tease that apart and unwind everything. They had a lot of restructuring to do, they had to move things around internally and that leads to a whole host of approvals needed from vendors, from landlords, and then there’s a whole host of associated tax issues. It’s like taking a box of puzzle pieces, throwing them on the ground and then putting them back together — it’s a painstaking process.

Q: How long did the transaction take to complete?

A: Once we were able to get an agreement on terms, we were actually able to close it by the beginning of September, so it only took three-and-a-half months from the announcement date of 13 May, which is quick. It took a lot of work and some luck to get it done so quickly.

Q: How did your team of 20 attorneys navigate these challenges?

A: It required close collaboration with the seller’s counsel and a lot of attention to detail. Corporate, intellectual property, tax and real estate, were all key parts of the team.

Q: To what extent was antitrust a consideration?

A: Competition was certainly involved and they did a great job because we got approvals in the US and Mexico in relatively short order. Glass is a funny thing, glass bottles in particular. They’re heavy and fragile, and consequently most of Vitro’s production is sold in Mexico. There was no second request from the FTC and the Mexican authorities got quite comfortable with it as well. Though Owens-Illinois is a major producer in the US, both US and Mexican authorities had no objection, for the reason that the production from Mexico is overwhelming used in Mexico. It doesn’t change the profile of either market. Owens is stepping into Vitro’s shoes in terms of manufacturing glass containers. It shouldn’t have an effect on the Mexican market.

Q: Why did the buyer opt to finance the transaction with cash?

A: Owens-Illinois was concurrently doing some financings in the public market as well and they had enough cash to do it. They were doing other work on their capital structure. They were taking additional risk with the deal, but Owens was confident that it had enough resources and could keep its capital structure in a healthy, rational state.

Q: What does the deal represent within the context of Owens’ global growth strategy?

A: It’s a piece that’s been missing. Owens is a very global business, with strong presence in the US and Canada, and a strong presence in Latin America. This transaction filled a gap.

Q: What made this deal stand out from other recent transactions you’ve worked on?

A: It’s certainly one of the largest acquisitions in Mexico of an industrial business for sure, and it’s something that’s been on Owens-Illinois’ radar screen, and as a result, our radar screen, for a long time, literally 20 years, as a potential transaction.

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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

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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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