Exclusive: Casino’s GPA considers spinning off Colombia’s Exito – sources

RIO DE JANEIRO, BRAZIL – (REUTERS) Brazilian food retailer GPA SA is considering a spin-off of its Colombian Almacenes Exito SA unit to GPA’s shareholders including parent company Casino Guichard Perrachon, two sources with knowledge of the matter said.

Such a transaction, similar to GPA’s recent spin-off of its Brazilian wholesale unit Assai, would fit with part of broader efforts by France’s Casino to simplify its structure in Latin America, potentially unlocking more value from its holdings there.

GPA owns almost 97% of Exito, which is listed in Colombia, with a market capitalization of US$1.5 billion, leaving it the company, which employs around 35,000 people in 515 supermarkets across the country, with an extremely small free float. The company also operates in Uruguay and Argentina.

GPA, listed on Brazilian stock exchange B3, has a market value of US$2.13 billion, suggesting either that the Brazilian parent is worth a fraction of the Colombian unit or that investors are failing to price in the value of its Exito holding.

The spinoff of wholesale unit Assaí from GPA, last March, resulted in an immediate rise of 10% of the companies’ combined market capitalization. Assaí is currently worth more than double GPA’s market cap.

GPA considers the ideal alternative would be to list Exito in Sao Paulo and give Exito shares to its shareholders base. But that is not possible, since B3 does not allow listing of foreign companies. GPA and Casino are considering if the best alternative would be to maintain its listing in Colombia only and issue Brazilian Depositary Receipts (BDR) to Brazil-based GPA shareholders, or to list it in another venue, the sources said.

One of the sources mentioned the possibility of listing Exito in the U.S. and issuing receipts for negotiation in Colombia and Brazil.

Asked by Reuters, GPA said “it is not discussing the issue and continues committed to long term investment in Colombia.”

One of the sources added that GPA and Casino are being cautious in the discussions and announcements to avoid alienating minority shareholders in both Latin American companies.

The transaction needs to be done in a way that leaves Colombian and Brazilian investors comfortable with the solution, the source added.