Retail chains are not part of the main strategies of their controlling shareholders
10/11/2022
The rivals of construction materials C&C, owned by the family Faria, and Telhanorte, which belongs to the French group Saint-Gobain, were put up for sale and are likely to compete for the same buyers. Although the sale of construction materials has grown in the country in 2021, the two major retail chains are not part of the main strategies of their controlling shareholders, sources familiar with the matter say.
With 77 stores in Brazil, Saint-Gobain hired Bradesco BBI to sell its retail chains in the country. Besides Telhanorte, the multinational owns Tumelero, with a strong presence in Rio Grande do Sul. C&C, which has 36 units in São Paulo, Rio de Janeiro and Espírito Santo and belongs to the daughters of Aloysio Faria, owner of bank Alfa, who died in 2020, is in talks with BTG Pactual to study the sale of the business.
The talks for the sale of the two chains have been going on informally for a few years. C&C’s Aloysio Faria resisted the idea of selling the chain he founded, sources familiar with the matter say. After the banker’s death, two years ago, the heiresses hired investment banks to evaluate the business – besides Alfa Bank and C&C, the Faria family owns the palm oil company Agropalma, the ice cream chain La Basque, the Transamérica hotel chain and radio stations.
Telhanorte is not Saint-Gobain’s crown jewel either, two sources told Valor. The French company has been looking for a buyer for at least four years, a person familiar with the matter said.
In the ranking prepared by the Brazilian Institute of Retail & Consumer Market Executives (Ibevar), the two chains are among the seven largest in the country. Saint-Gobain, which recorded revenues of R$15 billion in the country, does not disclose revenues per segment.
In 2019, the Faria family’s construction materials chain underwent restructuring, but the company arrived weakened in 2020, a year marked by the pandemic, as it was not prepared for online sales, sources say.
Last year, sales of construction materials totaled R$202.3 billion, a nominal growth of 34.3% over 2020. The real increase, however, is 4.4%, discounting inflation in the sector, according to a survey by the Brazilian Institute of Economics of Fundação Getulio Vargas (FGV/Ibre), compiled by the National Association of Construction Material Merchants (Anamaco).
Although sales will grow in 2021, retail specialist Enéas Pestana said that the construction material sector is difficult. “You can’t compare this sector to pharmaceutical and food retail,” said Mr. Pestana, who has a namesake consulting company and has seats on retail company boards.
Mr. Pestana recalled that the construction material sector has a lot of informal jobs and is formed by many small family-owned retailers. “It is an extremely pulverized sector, which has a lot of room for consolidation.”
Sources within C&C say that the points where the stores are located are likely to be of much more interest than the chain as a whole.
According to Mr. Pestana, the two chains that are for sale have strong brands in the market and are expected to entice investors, although they have already been made available to buyers informally a few years ago.
Mr. Pestana does not see the same buyer acquiring both brands. “Whoever places a bid for C&C will have to make a turnaround. I see Telhanorte more competitive at this point, since the group’s stores have a wider assortment and are more modern.”
The retail consultant sees financial investors, such as private equity funds, and strategic investors interested in the business. “But if an asset management company takes over the business, it will have to put people in the management team. It is not obvious for a private-equity firm to enter this sector without putting someone who understands the business.”
Advent entered this segment with the purchase of the building materials and homeware chain Quero-Quero in 2010. In August 2020, the fund raised R$2 billion in an IPO. Sources say the firm is not interested in returning to the sector.
Chile’s Sodimac is said to be a potential interest buyer of both businesses. The company acquired Dicico in 2013.
C&C and Saint-Gobain said they do not comment on market rumors. Bradesco BBI and BTG declined to comment.
*By Mônica Scaramuzzo — São Paulo
Source: Valor International