Brazilian retailers GPA and Assaí have approved the conversion of Extra Hiper stores to cash-and-carry format, which will be operated by Assaí.
The transaction, valued at R$5.2 billion (€820.6 million), includes stores in properties owned and leased from third parties, as well as the respective lease agreements.
Out of the total transaction value, R$4 billion (€631.2 million) must be paid by Assaí to GPA, in installments, between December 2021 and January 2024.
GPA signed another MoU with a real estate investment fund for the sale of 17 properties for R$1.2 billion. Assaí also entered into a separate MoU with the same Fund, regulating the lease of the properties acquired from Assaí, for a period of 20 years, renewable for the same term.
The overall transaction involves 71 stores, or approximately 70% of the total Extra Hiper network.
Another 32 Extra Hiper stores will remain with GPA, of which 28 will be converted into the higher performance banners Pão de Açúcar and Mercado Extra, while the remaining four will be divested.
Given that GPA and Assaí are jointly controlled companies of the Casino Group, the transaction was approved exclusively with the votes of the independent directors of GPA and Assaí at the respective meetings of their board of directors.
Growth In Core Business
The relevant proceeds from the transaction will enable GPA to accelerate growth in the core and most profitable banners, notably Pão de Açúcar, Minuto and Mercado Extra.
Also, GPA will boost its leadership position in retail and food e-commerce, in addition to improving EBITDA margin.
The Extra Hiper banner will be discontinued and stores not covered by the transaction will be converted into formats with greater potential for profitability.
As a result of this decision, Carrefour will remain as the main national hypermarket operation in Brazil.
For Assaí, the transaction will enable an important acceleration of the expansion programme, through the conversion of stores in dense regions and with low overlap with the current Assaí store platform.
Significantly, it will also make Assaí, the wholesale leader, with a total of 263 cash and carry shops, surpassing the current number of shops operated by its main competitor, Atacadão, which has 242 self-service wholesale points of sale.
Assaí banner opened more than 150 stores in the last decade, of which over 25 stores converted from Extra Hiper.