vrijdag 19 oktober 2012

Carrefour Sells Off Local Assets To Cencosud In $2.5bn Deal in Colombia

Cencosud, one of Latin America’s fastest-growing retailers, has announced a major expansion deal which will see it acquire Carrefour’s local assets in Colombia. Carrefour agreed to sell off its operations at an enterprise value of €2 billion ($2.6 billion) to the Chilean retailer. In a Thursday statement, Carrefour said the deal was in line with its strategy to focus on countries "in which it holds or aims to develop a leading position." French retailer Carrefour operates 72 hypermarkets, 16 convenience stores, and four cash-and-carry stores in Colombia, generating net sales excluding gasoline of €1.5 billion in the year ended June 30, 2012. `I believe this is positive for Carrefour`, said Bonno van der Putten, retail industry expert on Latin America. `I expect more of the same; in some extent it’s a dog, but with the new management in place, and a lot of pressure I see a turnaround on the horizon. This move is in line with Carrefour’s plans to exit non-core markets to focus on struggling operations in other countries and cut cost and boost profits. The company is refocusing its international strategy on regions where it already holds a significant postion and where it can become market leader”. The price to be paid by Santiago-based Cencosud includes debt and represents a multiple of 20 times estimated earnings before interest, tax, depreciation and amortization, according to van der Putten. That compares with the 13.6 times that Wal-Mart paid for control of Chile’s Distribucion y Servicio D&S SA, back in 2009. Cencosud just recently opened Latin America’s largest shopping centre, the Costanera Center in Santiago de Chile. “The company has operations in Argentina, Brazil, Chile, Colombia and Peru´, says Bonno van der Putten, retail industry expert on Latin America. The company operates through its Jumbo and Santa Isabel supermarket banners, and through the earlier acquired Easy home improvement chain and Paris department store chain. The company really wants to become market leader in those countries and is well on its way`, van der Putten said. Cencosud employs in total more than 140,000 people and with its 736 hypermarkets and supermarkets, 82 home improvement stores, 26 shopping centres and 76 department stores, the company is now becoming one of the larger retail players in Latin America. In a statement Cencosud said the Carrefour deal “marks a strategic entry  into the supermarket segment in Colombia”. Van der Putten states that Cencosud already operates the Easy stores in the Andean country. Colombia’s retail sales rose 1.2 percent in the month of August from the same period a year earlier, just announced by the national statistics agency. SACI Falabella, Chile’s largest retailer by market value, and Empresas La Polar from Venezuela, also have stores in Colombia, where Exito is market leader with a 43 percent share of the market. As a country Colombia show remarkable economic growth in recent years. The country is Latin America´s third largest economy after Brazil and Mexico with a fast growing middle class. Consumer spendings are on the rise. “ The middle class has exactly doubled during the last decade” , says van der Putten “ and 60% of Colombians now belong to the lower or middle class”. Growth has furthemore been spiraled by impressive growth in mining and energy and subsequently oil and coal production. Colombia is the world’s fourth largest exporter of coal and is one of the most important oil producing countries in the region. `Furthermore the country is been regarded more and more as a key geographical hub for multinational deals`, says van der Putten. `There is steady GDP growth, inflation is running low and the country has high levels of foreign investment`. Economic growth outpaced 6 % in 2011 and economic expectations forecast an expansion of the economy of 5% for this year. The only concern about Colombia's economical growth relates to the increasing reliance on the volatile construction sector. “ That sector is booming and housing prices are soaring” . “ Still the double digit growth figures of the construction sector are helped by huge public works and large national government projects such as the new airport in Bogota” , says van der Putten. “ But, one thing is sure, the country is certainly on the right rack now” .

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