Walmart to divest from Brazil: looking for partner

Walmart LogoAfter just over two decades in the Brazil, Walmart is negotiating the sale of part of its business in Brazil. The company has already started looking for a partner. But the model of the operation still depends on the proposals that are being presented to the retailer. At least four companies, including asset managers and private equity funds, are in talks with the company. They are: Advent, Catterton, Carlyle and General Atlantic.

The ongoing talks with private equity manager Advent International would involve the sale of 50% of the Brazilian subsidiary, newspaper “O Globo” reported yesterday. Both Advent and Walmart do not comment on the subject.

The US parent is taking direct care of the negotiations. Goldman Sachs has been advising the American group in the operation.

According to sources, there is a search for proposals for different options to structure this operation in the most convenient way for Walmart.

It is possible that the sale is of a minority slice or even the control of the two integrated operations (online and brick and mortar). Both options will be evaluated, according to a source. This is considered a sensitive trading, since it is not a practice for the American retailer to trade assets with investment firms. In the world, Walmart controls most of its business. In China, they have a minority partner.

When analyzing the parties interested, Catterton already has a retail operation in the country – it’s a partner in St Marche and Eataly. In the case of Carlyle, the fund also has retail operations in its portfolio – executive Hector Nuñez, president of RiHappy, was CEO of Walmart Brazil from 2006 to 2010.

Due to the complexity of the food retail business, and the results that the subsidiary has been presenting, industry executives think there is little room for a large number of interested parties.

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With 471 stores and ranking third among the largest food retailing groups in the country, Walmart did not grow in 2015 and 2016 when it achieved gross sales of R$ 29.4 billion (US$ 9 billion) – there is no data from last year. Until 2017, when it stopped detailing Brazil’s results in the world’s balance sheet, operating profits were alternated with losses in different quarters.

In the country, Walmart suffered in the past with errors in conducting the operation. There was too much interference from the headquarters, with mistaken decision making. The integration of networks bought in the country took years and the results were slow to appear. The integration process was finalized in 2016 and the subsidiary is currently running a R$ 1.5 billion plan to reform all supermarkets and hypermarkets in an attempt to breathe new life into the operation. This process is supposedly bringing some sales results to some stores.

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