Falabella Gains After Brazilian Home Stores Deal: Santiago Mover

SACI Falabella, South America’s third-biggest retailer by sales, rose the most in a week after it agreed to buy a majority stake in a Brazilian home-improvement chain to expand into the region’s largest market.

Shares gained 1.8 percent to 5,511 pesos at 2:04 p.m. in Santiago. It was the best performance on the benchmark Chilean Ipsa index, which dropped 0.2 percent.

Falabella, based in Santiago, said yesterday in an e-mailed statement that it will acquire 50.1 percent of Construdecor S/A, a Sao Paulo-based owner of building supplies and home-improvement stores, for 338 million reais ($163 million). The price is equivalent to about one year of the target’s sales, cheaper than Falabella’s own price-to-sales ratio of 2.3 times, according to Banchile-Citi, the joint research department of Banco de Chile and Citigroup Inc.

“At first glance, the operation seems accretive,” Banchile-Citi analysts Julio Zamora, Marcela Munoz and Matias Brodsky wrote in an e-mailed note to clients. “However, there is no information on the profitability of Construdecor’s stores, making it hard to determine valuation.”

The acquisition is due to close June 30.

Brazil had a gross domestic product of about $2.4 trillion in 2012, five times the size of South America’s second-biggest economy, Argentina, according to the International Monetary Fund. Chile’s GDP was $268 billion.

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