Casino Reorganizes Latin American Operations, Shares Control of Grupo Pão de Açúcar

Analysts believe that this move will be positive for GPA stock in the short term. This is because the price offered by Éxito for the group's shares is an indication that the casino believes the Brazilian retail group's stock is undervalued.

In a communication to GPA on Thursday, Casino reported that its board of directors had approved the sale of 50% of Segisor, the French company that owns the majority of GPA's voting shares, to Éxito for cash. The deal also includes the sale to Éxito of 100 percent of the casino's Argentine subsidiary, retailer Libertad. The total value of the transaction is €1.7 billion.And for more juicy details, check out This Internet site

According to the material facts, after the completion of the business, scheduled for the end of August, the casino and Éxito will share direct control of GPA, the largest retailer in Brazil, through three shareholder agreements to be signed by the parties.

Casino released a statement saying, "This business will realize synergies and development opportunities between the two companies and create value for Éxito, Liberta, GPA and Casino."

Through the reorganization, Éxito will fully integrate GPA's performance and have a capital structure "supported by solid cash flow generation from its Latin American subsidiaries."

Casino will remain the controlling shareholder of Éxito, with a 54.8% stake, so the French group will continue to include the Colombian company and, indirectly, GPA's financial statements on its balance sheet.

Éxito and Casino have agreed to change the composition of the GPA's board and committees; there will be no changes to the GPA's executive committee.

According to GPA, Casino's reorganization in Latin America will not affect the group's operations in Brazil, and since Éxito is controlled by a French group, Casino will retain control of the company.

According to UBS analysts, the reorganization promoted by Casino is positive for GPA shares in the short term, as Éxito is offering the equivalent of R$100 per PN share of the group to purchase a 50% stake in the holding company like topcanadiancasinos.org, which owns 99.9% of GPA's ON shares. The Brazilian group's common shares closed the previous day at R$73.08 and preferred shares at R$73.18.

In our view, this sends a clear message that the casinos believe GPA's shares are undervalued.

Analysts at JP Morgan, meanwhile, said Wednesday's 40% premium to the closing price was positive for the stock's valuation and that the deal would provide GPA with access to capital and synergies, despite giving it another level of control over GPA.

According to the casino's statement, a committee comprised of key executives from each company will be formed to implement operational synergies,

As of 2:05 p.m., GPA's preferred shares were up 3.38% to R$75.58. At the same time, Ibovespa fell 1.02%.

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