Amicable separation. Assaí, the cash & carry division of the Pão de Açúcar Group (GPA), controlled by Casino, has been flying its own wings since Monday March 1 on the São Paulo Stock Exchange and Wall Street. This is the result of a split planned since September. And she made sparks. The price of Assaí jumped at the opening of the session, and closed up 386% on the São Paulo Stock Exchange. At the same time, GPA (with Exito, which brings together the group’s assets in the rest of South America, and e-commerce, but without Assaí) slipped by 66%. The balance of the transaction is positive for the Casino subsidiary, since the group’s market capitalization has gained 14% (25.4 billion reals, or approximately 3.8 billion euros) compared to its value prior to the split. That is 19.2 billion reals for Assaí, and 6.2 billion for GPA when the markets close on Monday evening. The rise of the first thus largely offset the fall in the valuation of the second, according to an analyst.
“This IPO will allow us to operate autonomously, with separate administration and refocusing on our business model and on the opportunities that arise in the market”, said Assaí President Belmiro Gomes. It is above all Assaí’s cash & carry model which has proved to be much more lucrative than the traditional formats of supermarkets and hypermarkets.
Mine d’or
“It is clear that this performance is due above all to the growth recorded thanks to the cash & carry model, while traditional large-scale distribution is struggling to produce such good results”, says Henrique Esteter, analyst at brokerage firm Guide. Especially since “We still have to count on the economic effects of the Covid this year”, underlines Alberto Serrentino, consultant specializing in mass distribution. “The fall in employment and income will favor the cash & carry format”, adds the head of the Varese cabinet.
The fall in employment and income will favor the cash & carry format.
Alberto SerrentinoHead of the Varese law firm
From the investor’s point of view, Assaí would constitute a real « mine d’or », adds Henrique Esteter. “For now, it is mainly growth that is attracting attention. But in the longer term, it is an asset that could also help reduce part of Casino’s debt ”, adds the expert.
No decision has been taken regarding a possible capitalization of Assaí on the stock market. “The company would be able to complete an IPO, but it is not a pressing need. This will depend on the strategy of the shareholders and the financing of development projects ”, explains Alberto Serrentino.
Performance
Last year, Assaí, which competes in the same niche as the Atacadão stores of the Carrefour group in Brazil, recorded a 29% increase in sales (36 billion reals), while its net profit rose 25%. After opening 19 stores last year, the expansion is expected to pick up a faster pace, according to Assaí, with 28 units slated to open this year.
Assaí and Atacadão were created some fifty years ago before being acquired in 2007 by Pão de Açúcar and Carrefour, respectively. Competition obliges. The cash & carry format, very strongly developed in Brazil, is a mixture of semi-wholesalers that supplies both small businesses and the general public looking for lower volumes and prices.
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