Pão de Açúcar chmn urges Casino to decide fate of unit-sources

Tue Nov 27, 2012 8:43am EST

* Diniz wants Casino to speed up decision on unit

* Negotiations already underway-sources

* No formal bid for ViaVarejo has been submitted

By Vivian Pereira and Guillermo Parra-Bernal

SAO PAULO, Nov 27 (Reuters) - In a bid to end a bitter feud, the chairman of Brazilian retailer Grupo Pão de Açúcar SA has formally asked its controlling shareholder to sell its ViaVarejo home appliance unit to him, a source with knowledge of the situation told Reuters on Tuesday.

The chairman, Abilio Diniz, is looking to win control of ViaVarejo, Brazil's largest home appliances retailer, from Pão de Açúcar, according to the source, who declined to be identified due to the sensitivity of the issue.

Earlier this year, French retailing group Casino Guichard Perrachon took control of Pão de Açúcar, which was founded by Diniz' father in 1948.

Diniz and Casino have been at odds since April 2011, when Diniz tried to engineer a merger with a rival without Casino's consent.

A sale of ViaVarejo to Diniz, a move that could facilitate his exit from Pão de Açúcar, is seen by analysts and investors as the most effective way to end the dispute between both parties.

Diniz and his family are currently in the process of selling their voting shares in Pão de Açúcar to Casino through a put option agreement.

"Abilio is fully interested in seeing the negotiations make progress ... Casino has already said that it has no interest in owning consumer electronics businesses it doesn't own elsewhere," said the source. "But this indecisiveness is bad for everyone."

The decade-long business relationship between Diniz and Casino Chief Executive Jean-Charles Naouri was shattered last year, when the Brazilian tycoon tried to orchestrate the merger with Carrefour SA, Casino's archrival in France.

Naouri accused him of trying to break their agreement and threatened lawsuits to hold on to Pão de Açúcar.

Brazilian media reports have highlighted the latest feud between the businessmen. Diniz was barred from a Casino meeting with Pão de Açucar management at the French retailer's Paris headquarters on Monday, newspapers Valor Econômico and O Estado de S. Paulo reported.

According to Valor, Diniz sent a letter on Sunday to Naouri, explicitly seeking control of ViaVarejo. The letter said it was necessary to decide the fate of Via Varejo, adding that "the lack of a decision on the matter" could be "damaging" for Pão de Açúcar and the unit, Valor reported.

Diniz could swap his 6.5 billion reais ($3.1 billion) stake in Pão de Açúcar for ViaVarejo, and still receive another 1.5 billion reais from Pão de Açúcar for his exit, the newspaper reported, without citing sources.

INDECISION HURTS

The two men have exchanged angry letters, according to the papers. Diniz argued that his presence at the meeting "was necessary," while Naouri replied that the meeting was to discuss Casino's goals for the company and Diniz was not entitled to be there, Estado said.

Estado reported that Diniz was forced to wait in Casino's reception area for more than 40 minutes on Monday. While waiting, he sent a letter and several emails to Naouri.

"Regarding ViaVarejo, Casino would likely sell control only if it were to receive a fair value, which would benefit Pão de Açúcar shareholders," wrote Morgan Stanley & Co analyst Lore Serra in a client note Monday.

Serra resumed coverage of Pão de Açúcar shares with an "overweight" rating.

A second source said no formal offer for ViaVarejo has been submitted to Casino.

A Diniz representative confirmed that Diniz was barred from the Paris meeting. She declined to comment on any potential negotiations between Diniz and Casino over ViaVarejo.

Calls to two Casino representatives in Brazil were not immediately returned.

Pão de Açúcar shares have gained 40 percent this year and are trading at 26 times expected 2013 earnings - above the 21 times the average of 11 global rivals, according to Thomson Reuters data.

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