Rio's Casa & Video in Talks for Sale With Lojas Americanas, Private Equity

Casa & Video Rio de Janeiro SA, the Brazilian retailer with 66 stores in Rio de Janeiro state, is in talks to sell itself to Lojas Americanas SA or to a private- equity firm and expects an agreement by June, Chief Executive Officer Fabio Carvalho said.

An acquisition by Lojas Americanas, Brazil’s biggest discount retailer, would give Casa & Video more capital and stronger purchase power. Carvalho, 33, the company’s owner, said he is interested in an agreement that keeps its brand and business model.

“Our priority is to keep our business model,” Carvalho said yesterday in a telephone interview from headquarters in Rio de Janeiro. “We are not looking into being absorbed by someone else.” He declined to identify the private-equity fund with which he is negotiating.

Americanas disclosed the talks with Casa & Video in a regulatory filing in June. The Rio de Janeiro-based public company said it won’t comment further, according to its outside press officer, who can’t be identified because of company policy. Americanas shares rose 0.6 percent to 15.66 reais in Sao Paulo trading at 10:35 a.m. New York time. The shares increased 2.2 percent in the past 12 months through yesterday.

Brazil Retail Sales

Casa & Video, a home improvement, electronics and appliances retailer, ended 2010 with 1.3 billion reais ($776.9 million) in gross revenue and 40 million reais in earnings before interest, taxes, depreciation and amortization, Carvalho said.

Brazil’s retail sales rose more than economists projected in November, driven by credit growth and record low unemployment. Household appliances and electronics gained 2.4 percent on a monthly basis, while computer and office-equipment sales advanced 10.5 percent, the national statistics agency said yesterday.

Electronics and home appliances “is a very competitive sector,” Marcos Gouvea de Souza, senior partner and CEO at GS&MD Gouvea de Souza, a Brazilian marketing, retail and distribution consulting company, said in an interview in New York Jan. 11. “The products are almost like commodities, and the price comparisons and consequent low profitability favor even more consolidation.”

Carvalho worked as a restructuring consultant for Casa & Video in 2008 and took a controlling stake in 2009. After the restructuring plan was approved in November of that year and a new company created, he acquired the rest of the company from debtors along with the brand. Now, he is sole owner of both.

Store Openings

“We are looking for opportunities at the corporate level, but we also have things straightened up to move on our own,” Carvalho said. Last year, a possible sale was discussed with four different private funds, he said, declining to name them.

Casa & Video opened five new stores in the Rio state in 2010 and plans to open five to 10 more this year, Carvalho said. The home-furnishings and appliances chain started its own branded credit card in June and is negotiating with a financial institution to expand the operation.

“This credit card will grow in importance when we have a bank partner,” Carvalho said, adding that purchases using the card now represent 1.5 percent of total sales. Carvalho said he expects to have a deal with a bank by the end of the first quarter and use the proceeds to finance the store’s organic growth.

If a deal with Americanas or a private fund is achieved, “we would be able to expand more aggressively,” he said.

To contact the reporter on this story: Fabiola Moura in New York at fdemoura@bloomberg.net

To contact the editor responsible for this story: Francisco Marcelino at mdeoliveira@bloomberg.net

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