(BFM Stock Exchange) – The large distribution group has announced that it wanted to acquire all of the 32.8% of the capital of its Brazilian subsidiary which it does not yet have. This will allow him to fully consolidate his results and will result in a reread of his profit by action.

One week before the publication of its 2024 annual results, Carrefour reserved an unexpected announcement to its shareholders. The large distribution group said on Tuesday, February 11, after the end of the Parisian market, which it intended to rise 100% of the capital of its Brazilian subsidiary, Grupo Carrefour Brasil, listed in Sao Paulo.

The tricolor company currently holds 67.4% of this subsidiary operating on a key market for the company.

Brazil represents, in fact, the second Carrefour market behind France, the company making around 25% of its sales there in 936 stores and a third of its operating profit. Brazil is above all “by far the large growth engine” of Carrefour, underlines Stifel. The tricolor company notably holds there the brand of “Cash and Carry” (of large self-service stores, such as Costco) Ataçadao.

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Several options

Carrefour Brazil significantly increased its size in Brazil in 2022 by finalizing the acquisition of local actor Grupo Big, previously owned by the American Walmart and the Advent fund, for 1.47 billion euros. This added 20 billion reais or around 3.5 billion euros to this subsidiary.

The company led by Alexandre Bompard has therefore decided to rise to 100% of the capital of its Brazilian subsidiary and to remove Grupo Carrefour Brazil (which rates in Sao Paulo under the name Ataçadao) of the Stock Exchange. “‘The release of the rating will allow more agile management and a reinforced accent on the execution of operations,” said Carrefour in a press release.

With this in mind, the company proposed to minority shareholders different options. The minorities will be able to opt for a cash payment of 7.7 Brazilian reais per action Carrefour Brazil, which represents a bonus of 20% compared to the closing price of February 10 (and 32% compared to the weighted average price of volumes over the last three months).

Alternatively, they will be able to receive a Carrefour action for 11 actions Carrefour Brazil, and therefore receive Carrefour titles rather from cash. Last possibility: opt for a mixture of the first two options.

Carrefour clarified that Peninsula, the second shareholder of Carrefour Brazil, with around 7% of the capital, had chosen the option in shares and had thus decided to convert its Brazilian titles into actions Carrefour SA. Peninsula is the Holder of the Brazilian billionaire Abilio Diniz and it already has 8.8% of the capital of the French distributor.

A rational and opportunistic operation

The company expects the operation as a whole to be rereading (and therefore leads to an improvement) on its profit by action from the first year. Carrefour believes that the transaction should be finalized by the end of the second quarter of 2025.

On the Paris Stock Exchange, the announcement is timidly welcomed by investors, the Carrefour title being stable around 11:10 am after opening slightly.

For Stifel, the “timing” of this decision is appropriate for multiple reasons. The design office firstly notes that the benefits of the acquisition of Grupo Big in Brazil (notably the conversion of these stores to Carrefour signs) are just starting to materialize. Going up to 100% of the capital of its Brazilian subsidiary will thus allow crossroads to capture these benefits more which must result in an improvement in the results of Carrefour Brazil.

In addition, underlines Stifel, Carrefour takes advantage of the strong fall in the Carrefour Brazil action, whose course lost 40% over a year.

“Formerly there was an interest in distribution groups such as Carrefour and Casino to have subsidiaries listed in emerging countries, especially in Brazil, because the multiple valuation were significantly higher,” explains an analyst. “Historically, a distribution group in France could exchange 10 to 12 times the benefits expected over the current year against 18 to 20 times in Brazil. But this is no longer at all the case and have a subsidiary listed in Brazil now plays more unfavorably than favorably in valuation calculations “, continues this analyst.

Stifel estimates that Carrefour should pay a maximum of 700 million euros to rise to 100% of the capital of its Brazilian subsidiary, assuming that all the minorities with the exception of Peninsula opt for cash payment. According to its calculations, the operation should have a positive impact “with a low figure” (between 1% and 4%) on the action by action of Carrefour in 2025 and a figure “in the middle of the range” (between 4% and 6%) in 2026.

Action of action threatened

“This deal is rational, and seems a good long -term thing to us,” appreciates Oddo BHF.

However, the previously quoted anonymous analyst underlines that this Wednesday’s announcement “may mean that the acquisition of action made in recent years by Carrefour do not work” and that the company “may have decided to end it and To try something else, to tell a new story, while the 2024 results may also not be good. “

Carrefour had bought for around 800 million euros in shares in 2023 and intended to carry out 700 million euros in 2024. The group had started these securities buyouts in 2021.

“The question that remains is that whether, with regard to the cash-out to come (according to the options chosen by the minority), the group will maintain its program of share buybacks (or in these proportions) or if will favor a content lever (a low debt ratio, editor’s note) “also points out Oddo BHF.

“In absolute terms, all the solutions have arguments, but to choose in terms of capital allowance, perhaps what we would prefer to a SBB (program of action buybacks, editor’s note), would be to invest in Prices and market shares, a longer term than financial vision (even if being listed on the stock market provides this type of constraints), “says the broker.