Bloomberg News

Casino Increases Stake in Brazilian Partner Pao de Acucar

June 16, 2011

(Updates with comment by spokeswoman in fourth paragraph.)

June 16 (Bloomberg) -- Casino Guichard-Perrachon SA raised its stake in Cia. Brasileira de Distribuicao Grupo Pao de Acucar to 37 percent, strengthening its position after the Brazilian retailer reportedly held talks with rival Carrefour SA.

Casino bought 8.6 million Pao de Acucar preferred shares, equivalent to a 3.3 percent stake, the Saint-Etienne, France- based grocer said today. The purchase doesn’t change control of Grupo Pao de Acucar by the holding company through which Casino and the Diniz Group share command of the Brazilian retailer.

“This operation shows the group’s continuing commitment towards GPA and its trust in its executive team,” Casino said in a statement. “Casino thus reiterates its intent to strengthen GPA’s long-term development as well as the group’s positions in fast-growing markets.”

Casino filed for international arbitration against the Diniz Group last month after discovering its partner held talks with Carrefour, two people familiar with the matter have said. The stake increase doesn’t affect those proceedings, which will continue, a company spokeswoman said today.

Casino fell as much as 2.6 percent in Paris trading and was down 1.51 euros, or 2.2 percent, to 67.55 euros as of 9:25 a.m. Carrefour shares dropped as much as 3.2 percent.

Joint Control

Carrefour, the world’s second-largest retailer, hired Lazard Ltd. to study a merger between its Brazilian unit and Pao de Acucar, Journal du Dimanche reported in May, without saying where it got the information. The Diniz family could take a stake in the French retailer as part of the operation, the newspaper said at the time.

Casino, which owned 33.7 percent of Pao de Acucar before the increase, has had joint control of the grocer with the Diniz Group since July 2005. From 2012, Casino will have the right to appoint the chairman of Wilkes, the holding company for Pao de Acucar, and gain control of the retailer.

Casino, which gets a quarter of its sales from Latin America, intends to exercise the option to gain control of Pao de Acucar, a person familiar with the situation has said.

The Diniz Group agreed in 2005 not to sell its shares in Wilkes until 2014. All major management decisions must be unanimously agreed to and Casino and Diniz have the right of first refusal should the other wish to sell their shares after the lockup period, according to the pact.

--Editors: Paul Jarvis.

To contact the reporter on this story: Andrew Roberts in Paris at aroberts36@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net


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