June 28, 2011 / 1:15 PM / in 7 years

Brazil's Pao de Acucar agrees to investor buyout

SAO PAULO (Reuters) - Brazilian retailer Grupo Pao de Acucar (PCAR4.SA)(CBD.N) agreed to be acquired by a group of investors at 66 reais ($41.35) a share as part of a plan that would help the company join forces with rival Carrefour (CARR.PA).

The combined company, which will merge the assets of Brazil’s top two diversified retailers, will have a market share of about 27 percent, financial advisers to the deal said on Tuesday at a news conference announcing the deal. Such market share is more than double that of U.S. giant Wal-Mart Stores (WMT.N), currently Brazil’s third-biggest supermarket chain.

The deal, which involves the acquisition of Pao de Acucar by investment fund Gama, would count on the blessing of the Brazilian government, which through state development bank BNDES BNDES.UL would pour 1.7 billion euros ($2.4 billion) into the new company, said Percio de Souza, who heads investment banking firm Estater, Pao de Acucar’s adviser.

BTG Pactual BTG.UL, the largest Brazilian independent securities firm, will contribute 300 million euros to the new company and run Gama, said Claudio Galeazzi, a former chief executive of Pao de Acucar who is now a senior partner at Pactual.

The deal is subject to regulatory approval. Brazilian antitrust regulators are still analyzing Grupo Pao de Acucar’s acquisition of appliance retailers Globex Utilidades and Casas Bahia in June 2009 and December 2009, respectively.

“We will have massive scale gains if the transaction is approved,” Galeazzi told reporters in Sao Paulo.

The combination, engineered by Pao de Acucar Chairman Abilio Diniz, reflects the wish of Brazil’s government to keep large, homegrown conglomerates in sectors it deems strategic mainly in local hands. Under the terms of an option that takes effect a year from now, French retailer Casino (CASP.PA) could take control of Pao de Acucar and replace Diniz as chairman.

    On the other hand, the tie-up would allow Carrefour to snatch control of Pao de Acucar from archrival Casino in a bold move to broaden its footprint in a top emerging market. The combined company could become Carrefour’s biggest shareholder with up to a 16 percent stake, the advisers said.

    The investment holding company created by Casino and Diniz in 2006, known as Wilkes, would have its stake in the company diluted to 20.4 percent from about 25 percent now, the advisers said.

    ($1=1.596 reais)

    ($1=0.70 euros)

    Reporting by Vivian Pereira; Writing by Guillermo Parra-Bernal; Editing by Gerald E. McCormick and John Wallace

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