Brazil’s Administrative Council for Economic Defense (CADE) has approved, with restrictions, the acquisition of Grupo Big Brasil by Grupo Carrefour Brasil.
In its ruling, CADE explained that no competition concerns were identified in the wholesale distribution and retail fuel station markets.
However, in the self-service retail segment, the merger of the first and third largest players has the potential to generate the exercise of market power in nine different locations, it added.
Therefore, an Agreement on Concentration Control (ACC) was negotiated, which provides for the sale of 14 stores, of which 11 hypermarkets/stores and 3 supermarkets/soft discount stores.
These stores represent around 3.6% of the network and 6.0% of the 2021 revenue of Grupo Big.
According to Carrefour Brasil, the remedies are substantially lower to the threshold initially mentioned in the declaration of complexity issued by CADE (i.e. approximately 10% of BIG’s stores), which was disclosed in January 2022.
Viability, Attractiveness and Competitiveness
Both parties also committed to preserving the viability, attractiveness and competitiveness of the stores that will have to be sold until the divestiture is completed.
The antitrust authority also established that the companies cannot acquire the divested assets again for a period determined in the agreement, whose term is confidential.
In addition, they are obliged to notify any operations involving supermarkets, hypermarkets, wholesalers, and cash & carry outlets, even if they do not meet the parameters for mandatory notification of concentration acts to CADE.
Following CADE's approval, the parties may already close the transaction, which still depends on the fulfillment (or waiver, when applicable) of certain conditions precedent set forth in the agreement.
Carrefour Brasil Expansion
The acquisition allows Carrefour Brasil to expand in its traditional formats (notably cash & carry and hypermarkets) and boost its footprint in formats in which it has a more limited presence, in particular supermarkets (98 Bompreço and Nacional stores), and soft discount (97 Todo Dia stores).
In addition, Carrefour Brasil will operate in a new market segment (B2C) with the Sam’s Club format, through a license agreement with Walmart.
Grupo Big owns the real estate for 181 of its stores (47% of its total network) and 38 additional sites.