(Adds comment from analyst in fourth paragraph.)
June 28 (Bloomberg) -- Cia. Brasileira de Distribuicao Grupo Pao de Acucar gained the most since October 2008 in Sao Paulo on speculation Carrefour SA will merge its Brazilian assets with the retailer’s, overcoming opposition by rival Casino Guichard-Perrachon SA.
Pao de Acucar, the largest retailer in Brazil, jumped 13 percent to 73.25 reais at 4:15 p.m. New York time, a record close.
The proposal sets up a power struggle with Casino, which jointly controls Pao de Acucar with the Diniz family and called the plan “illegal” in a statement today. The deal, proposed by Banco BTG Pactual SA investment fund Gama, would save the combined companies about 700 million euros ($1 billion) a year, according to a separate statement.
“Certainly to have announced something of this size, they’ve already studied the problems they could encounter,” said Marcelo Varejao, an analyst at Sao Paulo-based brokerage Socopa Corretora. “The deal is very good for Pao de Acucar. Apart from the large synergies of the operation, you end up eliminating one of its direct competitors” as Carrefour will no longer be the Brazilian company’s rival, he said.
Casino said the plan violates a 2005 agreement with Pao de Acucar Chairman Abilio Diniz for it to become the sole controlling shareholder in 2012. Casino bought 24 percent of Pao de Acucar in 1999 and by June 16 had raised its stake to 37 percent.
The merger won’t change the shareholder agreement and will only be completed with Casino’s approval, Percio de Souza, partner at Estater Gestao e Financas, which advised on the deal, said in Sao Paulo today.
Abilio Diniz said he will evaluate the merger plan with Casino. A final decision will respect the law and the Pao de Acucar shareholder agreement, he said in an e-mailed statement.
Casino asked Diniz to immediately call a board meeting of the Brazilian company to discuss the merger proposal, according to a filing from Pao de Acucar. Diniz, according to a separate filing, said he’s been “unsuccessful” in trying to talk to Casino Chief Executive Officer Jean Charles Naouri for the past 24 hours.
Local regulators would review the proposed merger together with other recent acquisitions by Pao de Acucar, Fernando de Magalhaes Furlan, president of Brazil’s antitrust agency, said in a telephone interview today in Brasilia.
The proposal calls for Gama’s ordinary shares to be listed in Sao Paulo and as American depositary receipts in New York, according to the statement. If they approve the deal, investors will receive 0.95 ordinary Gama share for each preferred Pao de Acucar share held, and one ordinary Gama share for each ordinary Pao de Acucar share held.
That would value Pao de Acucar’s preferred shares at 66 reais apiece, the statement said.
Carrefour gained 3.7 percent to 27.44 euros in Paris trading, while Casino slumped 5.6 percent to 62.20 euros.
--With assistance from Felipe Frisch and Francisco Marcelino in Sao Paulo, Arnaldo Galvao in Brasilia, Thomas Mulier in Geneva and Stephen Taylor in Paris. Editors: Richard Richtmyer, Marie- France Han
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