Brazil Billionaires Feast on Their Compatriots' (Flip) FlopsBy
Havaianas sandals get passed from billionaire to billionaire
Cambuhy’s already bought assets from ex-rich guy Eike Batista
Brazilian billionaires are scooping up each other’s assets. Like flip-flops.
Little known Cambuhy Investimentos Ltda. did their scavenging earlier this month when they snapped up the maker of Havaianas sandals from J&F Investimentos SA. The boutique money manager is owned by Pedro Moreira Salles, co-president of Itau’s board, and Marcelo Medeiros, a former partner of Banco Garantia.
It’s the latest move -- and certainly not the last -- in a game of hot-potato among some of the country’s richest. It puts one of the nation’s most iconic brands in the hands of billionaire bastions Cambuhy, Brasil Warrant and Itausa - Investimentos Itau SA, at a price tag of 3.5 billion reais ($1.1 billion).
The "Brazilionaire" breakdown goes like this: Cambuhy and Brasil Warrant have the involvement of the Moreira Salles family, while Itausa is backed by the Setubal family. The Moreira Salles clan, with a combined fortune of about $21 billion, and the Setubals jointly control Itau, Latin America’s largest bank by market value. The transaction marks the end of an almost two-year period where Havaianas was controlled by J&F Investimentos, which is of course the holding company of embattled billionaire brothers Wesley and Joesley Batista, who sold their sandals stake to pay down legal settlements.
So why the splurge on sandals? These aren’t just any thongs. Havaianas is top-dog in the global flip-flop hierarchy, donned by the likes of Kim Kardashian and Gwyneth Paltrow, and the rarest of which are encrusted with Swarovski crystals and retail for $70 at Saks Fifth Avenue.
"Havaianas is a label that travels well, with great appeal both in the local market as well as overseas," noted Cambuhy’s Marcelo Medeiros from his Sao Paulo office. The footwear isn’t the first asset to be salvaged from the heap of troubled Brazilian billionaire corporations, and it may not be the last. Among others ready for the taking are J&F’s Vigor dairy company, Odebrecht’s Braskem chemical group and Petrobras’s BR Distruibidora.
Medeiros declined to comment on future possible acquisitions.
Alpargatas shares climbed as much as 3.9 percent, the most since July 14, to 14.80 reais. They are up 45.4 percent this year.
Not Their First Time
This isn’t Cambuhy’s first foray buying up other billionaires’ assets. Brazil’s once-richest man, Eike Batista, of late a prison inmate and no relation to the J&F brothers, provided an earlier opportunity.
Four years ago, hours before filing for bankruptcy protection, Parnaiba Gas Natural (then known as OGX Petroleo e Gas Participacoes SA), Eike Batista’s crude company, agreed to sell its only producing asset to Cambuhy and Germany’s EON SE for $154 million. That was less than the $173 million the company said in a document days earlier it expected to get by selling the unit to Eneva SA.
Years later, Cambuhy drafted the merger of Parnaiba Gas Natural and energy producer Eneva and is now the second largest investor in the combined entity, with a 25.7 percent stake. Eneva is said to expect 1.5 billion reais from a follow-on offering later this year, Valor Economico reported July 26, citing people familiar.
Opportunities on the Line
According to Medeiros, Cambuhy’s mandate has always been to have a few good opportunities, and not go overboard. One of the firm’s advantages is that all of its cash comes from its partners, so it doesn’t need a time line to provide a return to its investors.
"We could stay invested in our assets for decades," Medeiros said, though he added that doesn’t mean they will.
Cambuhy also owns a 4.7 percent stake at retailer Cia. Hering, a company akin to The Gap, which caters to the middle and upper-middle classes.
"They are both accessible brands, with great reach," Medeiros said, adding that investing in Hering made them more acquainted -- and more confident -- with the retail sector.
Havaianas’s parent company, Alpargatas SA, faces challenges to expand capacity utilization, which is around 50 percent, said Gustavo Gato, a portfolio manager at Explorador Capital Management, whose assets under management include shares of the shoemaker. International expansion is the way to get better use of assets and increase profitability, he said, adding that Alpargatas already sells more than one pair of the iconic flip flops per Brazilian per year.
"They need to increase the volume of pairs sold to have operating leverage, dilute costs and widen margins," Gato said. "I would like to see more driver activism in the day-to-day business. A very quick synergy would be to sell the flip-flops in Hering’s stores."