Latin Finance - September/October 2011 - 44

brazilian m&a
One investment banker not involved in deal after saying its proposal had always limited individual shareholders to a the process, but who works for one of the maximum of 15% of the voting shares of been contingent on approval by Casino. Gama, allowing BNDES, BTG and Diniz to banks advising on the deal, says BNDES Casino, meanwhile, issued a thorough wrest voting control of the company away would only be a choosing winner between rejection of the deal. The company cited two French companies rather than creating the increased exposure to the hypermarkets from Casino. The fight led to a bench-clearing brawl a true national champion. sector, which it says is on the decline in “Everyone went against it,” Kasinsky in which both parties retained multiple Brazil, as one of the main stumbling blocks. says. “People in Brazil didn’t think it was advisors, partly in an effort to simply “In terms of the strategy of the something that was really a necessity.” stymie the opposition from having access merger, it’s a different type of company,” Kasinsky is dubious the issue of to a particular bank, according to a banker Figueiredo says. “Carrefour invests only in Brazilian control of the company was even hypermarkets, while GPA is developing a at one of the advisors who requested to the primary motivating factor. “I don’t remain anonymous. strategy with smaller stores.” Figueiredo think that’s what it would work out to,” Casino retained Santander, HSBC, says the synergy figures that Diniz was he says. “The way I see it, it would still Goldman Sachs, Rothschild and pitching, on the order of 1.8 Merrill Lynch to advise on the billion reais a year, were unlikely negotiations, while Carrefour to be achieved. hired Lazard, and Diniz used local Eric Conrads, global strategy boutique bank Estater Gestão e and head of research, Latin Finanças. America at ING Investment BNDES declines to comment Management, agrees. “Looking at on the deal, other than to say all the elements of the deal, it just its proposal had always been didn’t make sense for us to stay,” contingent on the agreement by he says. all shareholders. Diniz and GPA ING had been overweight on both decline to comment. CBD since the end of January, Diniz, and his partners at when it traded at around $36 per BTG, likely pitched the deal to share. “It was a pretty compelling BNDES as an attempt to maintain investment from the synergies Brazilian control over a major they could gain from all the company in the local market, acquisitions they made,” he says, along the lines of its other efforts including additional value to be to create national champions, wrung out of its Globex and Caixa says Ronaldo Kasinsky, equity Bahia acquisitions. analyst with Banco Fator. Conrads says his firm used BNDES likely saw the deal as the run-up in the stock to exit its an opportunity to support Diniz position once shares rose past as a Brazilian shareholder, and $46. “I see more problems than provide BTG with a chance to upside,” he says. The potential for take a stake in the resulting new a Cade investigation, similar to company, he adds. what happened with Brasil Foods, Did the BNDES act too quickly to support Carrefour’s bid for GPA? Such logic didn’t necessarily was one possible pitfall. Minority make much sense as Carrefour shareholders were also unlikely to be run by two French groups. I don’t see would have been the largest shareholder be able to exert any influence in the event it as maintaining (CBD) as a Brazilian with a 50% stake in the new company, of a merger. corporation.” making CBD effectively a subsidiary of a Investors were also skeptical that the According to Kasinsky, the deal was French parent. new entity would facilitate the sale of “just a big misunderstanding. BNDES The perception that BNDES was Brazilian goods in the French market, thought it was an interesting operation throwing its weight behind a deal that through the proposed 11% stake in because it would be able to buy into a would ultimately be controlled by Carrefour. “If Brazilian products are so major group that was being formed, but I a foreigner did not sit well with the good or so cheap, it’s easy to sell to anyone don’t think they really thought about the local press and the public, leaving the outside of Brazil,” Figueiredo says. question.” development bank surprised by the Figueiredo agrees. “I think BNDES backlash that ensued, say analysts A Second Chance? acted too quickly, or they didn’t discuss it,” BTG, at least, seems to believe that a deal is “The structure didn’t create any he says. “They thought they would make a still possible, saying over the seminar it was Brazilian champion,” says Sergio Figueiredo, a senior analyst at investment big blockbuster structure.” in discussions with other potential investors The bank was forced to beat a hasty firm Guepardo Investmentos. “Half of this that could take the development bank’s retreat, withdrawing its support for the operation would be held by Carrefour.” place. If that is the case, Lazzarini says,

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September/October 2011

Latin Finance - September/October 2011

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