SouthRock Bids for Shareholder of Eataly Unit in Brazil

  • Buyout firm to pay $67 million for around 50% of St. Marche
  • St. Marche said to seek stake sale to pay debt, expand

SouthRock Capital, a Sao Paulo-based private-equity firm founded last year, offered about 220 million reais ($67 million) for a stake in closely held grocer St. Marche group, a shareholder in the Brazilian unit of gourmet-food chain Eataly, said two people familiar with the proposal.

The firm would pay cash and receive a note convertible into St. Marche shares in three years, one of the people said, asking not to be identified because the talks are private. The person said that SouthRock could receive a stake of more than 50 percent depending on the performance of St. Marche, which operates 20 grocery stores in Sao Paulo state, Brazil’s richest region.

St. Marche holds a 40 percent stake in closely held Eataly Brazil. It is seeking to sell a stake to reduce its debt and fund store expansions, the people said. Eataly has a store in Sao Paulo, and its international units operate in large cities including New York and Tokyo.

Brazil mergers and acquisitions have plummeted 30 percent this year, extending a multiyear slump amid the worst recession in decades. Latin America-focused private-equity funds may now be in a position to start purchasing assets cheapened by the crisis, especially after signs that the currency may have bottomed.

SouthRock has also offered to purchase shares in St. Marche directly from current holders, the people said. The firm was founded by Kenneth Pope, previously the head of Laco Management, a Brazilian asset manager that is the largest individual investor in St. Marche, with a 30 percent stake.

Officials for St. Marche and SouthRock declined to comment.

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