Casino Guichard-Perrachon SA’s Colombia unit fell to the lowest in four years after saying it would buy some of the parent company’s Latin American supermarket assets for 1.7 billion euros ($1.9 billion), boosting debt.
The acquisition of stores in Brazil and Argentina will make the unit, Medellin-based Almacenes Exito SA, one of the region’s largest grocers and boost profit by about 30 percent, according to a presentation Thursday. Exito will also take on as much as $1.6 billion in debt.
Exito shares fell 6.6 percent to 21,300 pesos at 2:20 p.m. in Bogota trading, reaching the lowest since 2011 as they declined the most since 2008. Casino shares gained 1.6 percent to 67.75 euros in Paris.
Investors are worried that the transaction may be motivated by balance-sheet needs and not because it’s a good business opportunity, Jose Restrepo, an equity strategist at brokerage Serfinco SA, said in a phone interview from Medellin. Bruno Monteyne, an analyst at Sanford C. Bernstein in London, said in a report that the transaction will shift cash to France and move debt to Latin American operations.
“Overall this transaction deals with the major imbalance previously existing in Casino: that cash was made in the subsidiary companies” while the parent company held the debt, Monteyne said.
Following the acquisition of Argentina’s Libertad grocery chain and half of Casino’s stake in Brazil’s Cia. Brasileira de Distribuicao, Exito will operate more than 2,500 stores and be the market leader in Brazil, Colombia and Uruguay, Casino said Thursday. Cost savings will be about 145 million euros, with 80 percent of that realized within 18 months.
Casino, which owns 54.8 percent of Exito, will remain controlling shareholder of the Colombian company and doesn’t rule out acquiring more shares in the businesses in coming months. The transaction doesn’t affect the group’s total debt of 5.8 billion euros, which should remain unchanged this year, Naouri told reporters in a briefing.
Exito, which will finance the purchase with cash and new loans, will be well-placed to make additional acquisitions in the region, said Jean-Charles Naouri, chief executive of Saint-Etienne, France-based Casino. The company isn’t studying any specific deals now, Naouri said, while indicating that acquisitions could include businesses in Central America because the region has strong ties with Colombia.
“This is a historic move for Grupo Exito. It’s a game changer,” Carlos Mario Giraldo, CEO of the unit, said on a conference call. “This is the biggest step forward, taking Exito from being a Colombian company with a small position in South America, to make it the leader.”