Casino exito

Shares of GPA, which owns the Pão de Açúcar chain, closed Monday up 8.67% —the highest among the stocks that make up the Ibovespa— at R$3.76, after rising 17.34% at the day’s high.

The sale puts an end to a long negotiation and includes a restructuring plan by Casino, whose stake in Éxito totals 34% ($400 million). For GPA, the transaction, which had been expected by the market, is part of an effort to reduce the company’s leverage by selling non-core assets —other divestments are still on the radar. In addition, the company has already sold 11 stores this year in sale and leaseback transactions for R$330 million.

From initial contact to final agreement, talks with Grupo Calleja took about two months and began shortly after Casino and GPA rejected offers from Colombian billionaire Jaime Gilinski, the last in July. The shareholders did not agree with Mr. Gilinski’s terms, and GPA even published a list of conditions for the next interested buyers, such as the inclusion of a significant termination fee if the transaction is not completed.

When Calleja sat down at the table, its lack of experience in mergers and acquisitions came to the fore, leading the company to take a more passive role in the talks despite its interest. It was up to the selling side to take a more active, persuasive role, sources told Pipeline, Valor’s business news website.

In the end, Calleja agreed to four key conditions for Casino and GPA that were critical to the deal: the transaction could not be subject to due diligence; there could be no financing risk; the purchase had to be for 100% of the shares; and, of course, the price had to be attractive.

The valuation in Calleja’s proposal was not that much higher than Mr. Gilinski’s latest bid of $1.15 billion. But there was a fundamental difference: the Colombian’s proposal was for 51% of the company, on a pro rata basis, where he would buy 51% of each shareholder’s share, which meant that Casino and GPA would continue to hold stakes that they didn’t want.

Another interested party appeared during the talks with Calleja, an U.S.-based private equity fund, but there was no agreement on two of the four main conditions of the sellers: the candidate did not want 100% of Éxito and asked for a 60-day due diligence.

According to a source close to the talks, due diligence was not a problem for Calleja because the El Salvadoran group operates in the same segment, food retailing, and was satisfied with the analysis of the information published quarterly by Éxito, a company listed on the Bogotá Stock Exchange.

The acquisition of Éxito was Calleja’s first step in international expansion. Today, the Calleja family business operates 110 stores in El Salvador under the Super Selectos brand. Éxito, which also has units in Colombia and Uruguay, had an adjusted EBITDA of about $400,000 last year, and is expected to double the Calleja group’s results in this segment, Pipeline learned.

To complete the transaction, Éxito will have to make a takeover bid in Colombia and the United States. The proposed amount represents a 51% premium over the stock market price. Payment will be in cash.

The Bogotá-based company’s shares had been on a downward trend after GPA split off part of the company to its shareholders in August, leaving it with a 13.3% stake —Casino had taken 34%. Since GPA’s investors in Brazil had no interest in having an asset in Colombia, this created selling pressure, which ultimately increased the premium paid by Grupo Calleja.

The amount GPA will receive represents almost 80% of the company’s market capitalization on B3. The settlement should take place between the end of this year and the beginning of next year. The transaction is subject to approval by the U.S. Securities and Exchange Commission (SEC). Casino and GPA were advised by Citi.

The original story in Portuguese was first published on Valor’s business news website Pipeline.