Dec. 23 (Bloomberg) -- Companhia Brasileira de Distribuicao Grupo Pao de Acucar, Brazil’s biggest retailer, is shopping for a banking partner to handle credit financing as it adds more than 30 million clients through acquisitions of electronics and appliance businesses.
Itau Unibanco Holding SA, Brazil’s largest bank by market value, paid Pao de Acucar 600 million reais ($337 million) on Aug. 28 to end its exclusivity accord with the retailer that it couldn’t honor after buying Unibanco SA in March. Casas Bahia, which Pao de Acucar bought earlier this month, has a separate agreement with Banco Bradesco SA, the nation’s second-biggest bank, to provide credit financing that will end next year, Pao de Acucar Chief Operating Officer Eneas Pestana said.
“The big news is that we are not tied either to Itau or to Bradesco, after awhile,” Pestana said in an interview Dec. 21. “We want partners. Credit is an extremely important business, especially in the electronics segment. It must be someone who follows the aggressiveness” of the market, he said.
Mailing List
Casas Bahia relies on financing for 80 percent of its sales, which are set to total 13 billion reais this year, the same as in 2008, Chief Executive Officer Michael Klein said in an e-mail response to questions. The home appliance and electronics retailer has a registry of 30 million customers’ credit history and expects 20 percent annual growth in clients, Klein said.
“Can you imagine a mailing list of 30 million clients that buy and pay for their purchases?” Pao de Acucar’s Pestana said in the interview at the company’s headquarters. “It is really a sensational business.”
Consumer financing at Pao de Acucar may increase “very significantly” as its purchases of Casas Bahia and Globex Utilidades SA increase the share of electronics sales in consolidated revenue to almost 50 percent from as low as 12 percent, said Renato Prado, an analyst at Banco Fator SA in Sao Paulo. Pao de Acucar’s revenue totaled 6.2 billion reais in the third quarter.
Electronics sales are “very dependent on credit basically due to the higher average ticket, which is much higher compared to the food segment,” Prado said.
Pao de Acucar fell 0.06 percent in Sao Paulo trading at to 63.46 reais and is up 105 percent this year.
Antitrust Ruling
Pao de Acucar will choose a banking partner for consumer credit financing for the new company to be formed after receiving approval from antitrust regulators for the integration of Casas Bahia and Globex’s Ponto Frio electronics and appliances operations, Pestana said. The businesses it is acquiring aren’t covered by an exclusivity agreement Pao de Acucar extended with Itau for five years in August.
Casas Bahia’s agreement with Bradesco expires in October 2010, Klein said.
“If I need to do a bidding competition between banks, I can do it,” Pestana said “‘Now I don’t need to respect an exclusivity I don’t have anymore.”
Press officers for Sao Paulo-based Itau and Osasco-based Bradesco declined to comment.
Sao Paulo-based Pao de Acucar, with a market value of 15.4 billion reais, paid 824.5 million reais for a 70 percent stake in Globex in June, consolidating its lead over multinational competitors Paris-based Carrefour SA and Wal-Mart Stores Inc. of Bentonville, Arkansas. The Brazilian retailer agreed to buy Casas Bahia on Dec. 4 to strengthen its home appliances business.
Casas Bahia relies on credit card financing for 40 percent of sales and store financing for another 40 percent, Klein said.
To contact the reporter on this story: Fabiola Moura in New York at
fdemoura@bloomberg.net ===
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Carlos Eduardo
