Pão de Açúcar and Casino Create a Giant Global E-Commerce Company: Cnova

Grupo Pão de Açúcar (aka Companhia Brasileira de Distribuição – CBD), Via Varejo (VVAR11:BR) and French group Casino Casino Guichard-Perrachon (OTC:CGUIF) (OTCPK:CGUSY) have announced a joint venture to create a giant new e-commerce company: Cnova.

CBD and Via Varejo will own 53.5% of the new company, while the remaining 46.5% will belong to Grupo Casino. The French group has already filled for an IPO of the new company in the US.

Cnova is born as one of the largest e-commerce companies in the world, with a volume of goods  nearly US$5 billion, based on data from 2013. The company will have a large presence in France, Colombia, Thailand and Vietnam through the Cdiscount websites, besides Brazil, with Extra.com, CasasBahia.com and Pontofrio.com, sites operated by Nova Pontocom, a company owned mainly by CBD and Via Varejo.

According to the companies’ release, the success of Cnova will be based on a business model of low cost operations, attractive prices, a wide variety of products and delivery solutions and highly differentiated payment.

Cnova will have two co-presidents, and one will probably be the current president of the Nova Pontocom, Germán Quiroga Pasquale, while the other will be the president of Cdiscount.

Moreover, the company’s board will consist of 9 members, 3 appointed by Casino, including Jean-Charles Naouri – president of Casino and who will be the chairman -, 2 members shall be appointed by Pão de Açúcar, 1 by Via Varejo, while the other two members will be independent. Finally, the two co-presidents will switch in the position that remains on the board.

While the news is positive in general, Via Varejo, the brick-and-mortar side of CBD, may end up with the worst part of it. If Cnova gets the same buying power that Via Varejo has and transfer this benefit to the end consumer, there may be serious cannibalization of the physical stores from Via Varejo. Casino has reportedly always wanted to do an IPO of its global operation with the intent of extracting value from Nova.com, the online arm of CBD, which Casino partly owns.

In 2013, Nova.com had a revenue of BRL 4.8 Billion (approximately US$ 2 Bi) versus BRL 25 Billion from Via Varejo. This number could change drastically in the mid to long term, which would be neutral for Casino and CBD but negative for Via Varejo.

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CADE rejects Telefónica and Telecom Italia merge. Vodafone is arriving in Brazil?

Brazilian antitrust authority,  Administrative Council for Economic Defense (Cade) rejected Telefónica’s (TEF) embargoes and kept the fine of BRL 15 million that was imposed on the company for breach of the agreement signed in 2010, by which it should stay away from TIM (TSU), controlled by Telecom Italia (TI).

Official Announcement

With the negative for the embargoes, Telefónica must appeal of the decision. Therefore, it is necessary to wait for the posting in the “Diário Official”, the official newspaper.

The fine was imposed against Telefónica on December 4th, 2013, when the antitrust authority imposed conditions when judging the acquisition by the Company of shares of Telco, holding that controls Telecom Italia.

According to Cade, Telefónica will have to choose between seeking a new partner in Vivo (VIV), who would be entitled to have 50% of the control in this company, or selling the stakes it acquired in TIM through the purchase of shares of Telco.

Rumors have that Vodafone (VOD), who recently started operating in Brazil via enterprise services, is looking to expand into the consumer market and is interested in acquiring a stake in TIM, since it’s very unlikely that Telefónica would let got of the control on Vivo.

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Long in Brazil? Then Cheer Against it in FIFA’s World Cup

Wait.. What does football has to do with economy or stock investment? And even worse, how come a negative result for the country can be positive for it’s economy?

NeymarFair questions. And to answer them, we have  to remind that this year is also election year in Brazil and that football is not just one sport here. It is THE sport everyone follows. It’s almost embarrassing for us that we pretty much have no other sport. But the reality is it can change the country’s mood.

The other thing to be aware is that no matter what happens within the field, one thing is a given for this world cup: There will be riots! Maybe only pacific ones maybe not. In fact, PCC, a criminal organization is allegedly arranging less-than-pacific protests with black block. Now, the population in general is against any violent protest and would support the government and police in containing them. The part that can really change the election scenario is actually the pacific protests. And the reason is that those are supported by the majority of the population and tend to be very negative on the government currently on power.

Still not making any sense? We’ll get there… Bare with me.

So, what could change the population’s humor against the world cup? A Brazilian victory. If Brazil wins the hexa, protests will lose its strength. Make no mistake: most people in Brazil say they are against the world cup happening here but they will definitely get involved once the ball starts to roll.

So, if Brazil wins, it’s very likely that the government will get a little bit of a break and therefore Dilma becomes stronger for reelection in October/ November.

And that is why you should cheer against Neymar and team, if you are long. It’s been very clear lately the inverse relation between Dilma’s performance in the election pools and the stock market. Why? Because their government sucks (sorry for the technical term) for the private sector. PT, the labor party Dilma belongs to, has strong social programs and a good record of getting people out of poverty (especially in Lula’s first 4 years), which is great of course! But they don’t do the necessary investments and reforms the country desperately needs.

So.. what’s left? Vamos España! 🙂

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