Carrefour merging in Brazil?

Two recent news about Carrefour’s operations in Brazil. A possible merger with Grupo Pão de Açucar and the deal with Itau Unibanco, which bought 49% of the French retailer’s bank.

According to Dow Jones in Paris, Carrefour SA may seek to merge its Brazilian unit with Brazil’s largest retailer – Grupo Pao de Acucar.  Carrefour has faced  “mounting pressure on the French retail giant to increase the value of its assets ahead of a shareholder meeting next month.”

About Pão de Açúcar (CBD)

The Brazilian retailer reported strong EPS in 1Q11, materially above our forecast. Analysts stress that there were clear improvement in the durable goods segment’s financial expenses, which came in 14% below our forecast and 26% lower QoQ, even though the Brazilian basic interest rate increased on a QoQ basis. The stock currently trades at 29.8x P/E11E and 10.9x EV/EBITDA11E, with an estimated earnings CAGR 11-14 of 39% and EBITDA CAGR 11-14 of 21%. (Bradesco Corretora)

Sinergies after merging with other Brazilian retailers: Casas Bahia and Ponto Frio

Pão de Açucar achieved a strong gross margin due to synergies from the integration of Casas Bahia and Ponto Frio and the consolidation of both operations, was also the reason for the better-than-expected EBITDA margin in the durable goods segment. However, Casas Bahia’s heavier operational structure led to a 548bps YoY increase (+56bps above our forecast) in the SG&A expenses as a percentage of net revenues, partially offsetting the higher gross margin, but still leading to an higher EBITDA margin 17bps above our forecast and +28bps YoY. (Bradesco Corretora)

About the Itau Unibanco dealItaú Unibanco announced the acquisition of 49% of Banco Carrefour for R$725 millions. The bank is linked to Carrefour, Brazil’s second-largest supermarket, with more than 160 stores in the country and over R$29 billions in revenues in 2010. Banco Carrefour’s main product is its private-label credit card, although various other products are also available. With total assets of R$2.8 billions and a credit portfolio of R$2.3 billions, the bank reported accounting net earnings of R$155 millions for 2010. (Bradesco Corretora)

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About Hildete Vodopives

Hildete de Moraes Vodopives is founder of Brazil Global and of the Harvard Strategists Bureau. She is a member of the Brazilian Investment Analysts Association (APIMEC-Rio) where she served as Corporate Relations Director and later, on the board. Hildete advises companies doing business in Brazil. She lives between Paris and Rio and is a member of the Harvard Club of Paris and of the Mercosur Women’s Forum.
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