IT’S hard to argue with Carrefour’s rationale for merging its Brazilian operations with Grupo Pao de Acucar (GPA), Brazil’s number one retailer.
The combined company would be a force to reckon with, with almost a third (27 per cent) of the Brazilian grocery market and over $40bn in annual sales.
Brazil is already Carrefour’s second largest market after France. After the deal, the world’s second largest retail group by revenue would garner 40 per cent of its sales from emerging markets.
Around 50m Brazilians have joined the supermarket-shopping middle classes over the last decade – and growth projections suggest tens of millions more will follow.
The Brazilian economy is projected to grow 3.94 per cent this year and 4.1 per cent next, according to the country’s central bank.
There’s just one problem. Carrefour’s biggest rival Casino, which has a controlling stake in GPA, is trying to block the deal. We think the Seine will freeze over – in July – before management at Casino let the deal go through.
Some have suggested that Casino could walk away with a tasty premium for its stake in GPA, considering the €600m-€800m that Carrefour reckons it could save annually from the merger.
That would leave it free to concentrate on other, even faster-growing Latin American markets.
We still think there is plenty of easy money to be made in the Brazilian grocery market. Casino – which holds all the cards – would be mad to give up without a fight.