SANTIAGO (Reuters) - Struggling French retail giant Carrefour CARR.PA is selling its Colombian assets for $2.6 billion to Chile's Cencosud CEN.SN, pulling out of another non-core country to better defend its key markets.
Carrefour, the world’s second-largest retailer, has embarked on a major restructuring under new Chief Executive Georges Plassat to cut costs and debt, and its withdrawal from Colombia follows exits from Greece and Singapore.
The deal gives acquisition-hungry retailer Cencosud a large footprint in Colombia, which like other Latin American economies is benefiting from a growing middle class and increasingly easy access to credit.
To finance the 2.0 billion euro purchase, which would be the biggest by a Chilean firm abroad to date, Cencosud said it had signed a $2.5 billion loan agreement with JP Morgan Chase Bank.
“Not only are we acquiring a great operation, but we’re also entering an extraordinary market, which wouldn’t have been possible via organic growth,” said Cencosud President Horst Paulmann.
Cencosud, which listed on the New York Stock Exchange earlier this year, recently purchased Brazilian supermarket chain Prezunic and Chilean department store Johnson’s, and also has operations in Argentina and Peru.
The Carrefour deal will give it 72 hypermarkets, 16 convenience stores and 4 cash and carry stores in Colombia, adding to the some 900 stores and 26 commercial centers it operates in the region. It expects to close the deal by the end of the year.
EUROPEAN RETAILERS HURT
While Latin American firms have started to flex their M&A muscles, European retailers have been hurt by poor performances in austerity-hit countries and as hypermarkets have suffered from a shift towards more local and online shopping.
In August Carrefour announced plans to cut up to 600 jobs in France but Plassat, whose reputation as a cost-cutter has earned him the nickname of “Le Nettoyeur” (the cleaner), gave few details of his turnaround plans.
He did say that Carrefour wanted to defend mature markets like France and Spain as well as its operations in growth markets Brazil and China. Countries under review included Turkey and Indonesia.
“This transaction is in line with Carrefour’s new strategy of focusing on geographies and countries in which it holds or aims to develop a leading position,” the French retailer said in a statement.
Cencosud’s acquisition follows others by successful Chilean firms, including miners and banks that have been increasingly seduced by Colombia, which boasts a low inflation rate, natural resources and buoyant domestic demand.
Chile’s CorpGroup earlier this month said it intends to buy up to 100 percent of the shares of Colombia’s Helm Bank for around $1.3 billion in what would be a Chilean financial firm’s biggest purchase abroad and create Colombia’s fifth-largest bank.
The export-dependent Chilean and Colombian economies are seen expanding 5 percent and 4.5 percent respectively this year, according to the United Nations economic body for Latin America.
Shares in Cencosud closed 0.1 percent higher on Thursday before the deal was announced. Shares in Carrefour closed 1.4 percent stronger.
(1 euro = 1.30 dollars)
(1 dollar = 472.60 Chilean pesos)
Reporting by Santiago newsroom; Editing by Edwina Gibbs
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