Magazine Luiza buys Brazil’s largest e-commerce platform for technology and games

RIO DE JANEIRO, BRAZIL – “With the purchase of KaBuM!, we have consolidated our position as one of the leaders in Brazilian formal e-commerce and strengthened our presence in one of the fastest-growing markets in the world — products for geeks and gamers,” says Frederico Trajano, CEO of Magalu (Magazine Luiza).

In a year and a half, Magalu acquired 21 companies. The KaBuM! purchase operation is the largest of them. The company, created in 2003, in Limeira, in upstate São Paulo, has a business model that combines accelerated growth and high profitability.

In the last 12 months, the acquired e-commerce had gross revenue of R$3.4 billion and a profit of R$312 million. “This level of profitability presented by KaBuM! is not common in e-commerce players, which shows the efficiency of the company’s management,” says Trajano.

With the purchase of KaBuM!, Magalu reinforces the strategic pillar of new categories, with an assortment that complements the current one and with enormous growth potential.

OPERATION STRATEGY

From now on, this platform will be incorporated into Magalu’s ecosystem and operate in cooperation with Jovem Nerd and Canaltech, recently acquired businesses that dialogue with the same universe of clients.

With the recent acquisitions, KaBuM! and Magalu will be able to offer a complete shopping, content, and entertainment experience for technology lovers and gamers.

KaBuM! will also enjoy a number of benefits offered by Magalu’s platform: product offerings in the SuperApp, use of multichannel and the fastest delivery system in Brazil, and financial products such as credit cards and insurance.

The total amount of the acquisition will be paid in three installments. The first installment, in cash, is R$1 billion (US$200 million). The second stage involves the transfer of 75 million Magalu common shares, over the course of a year and a half.

The third stage of payment — of up to 50 million shares — will take place in January 2024 and will be conditional on the achievement of KaBuM! goals.

GAMING MARKET

The company also deepens its position in the gamer market, which grows exponentially in the world and in Brazil — according to the e-sports consultancy BBL, there are 95 million gamers in the country.

Data from the consulting company Accenture show that the global gaming industry will reach US$300 billion by the end of 2021, a revenue greater than the music and movie sectors combined.

KaBuM! is one of the precursors of electronic sports in Brazil. It created one of the biggest League of Legends teams in the country: KaBuM! KaBuM! Esportes also supports other e-sports modalities, such as Counter-Strike, FIFA, and Free Fire.

In 2020, with new consumption habits stimulated by the pandemic, its sales grew 128% over the previous year. With 2 million active clients, KaBuM! offers more than 20,000 cutting-edge technology items for professionals and the gamer universe.

NEW SHARES

Magalu announces a follow-on, the issuance of 150 million new shares. The syndicate of banks responsible for the operation is led by Itaú and BTG Pactual, and also includes J.P. Morgan, Merril Lynch, Banco do Brasil, Bradesco, Goldman Sachs, Morgan Stanley, Santander, and XP.

The funds raised will be used to expand Magalu into new markets, to invest in logistics, with the opening of new distribution centers and hubs, and to pay for strategic acquisitions. One of them is Hub Fintech, made in December 2020, whose purchase — of R$290 million — was recently concluded, after approvals by Brazil’s antitrust agency CADE and Central Bank.

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