Group intends to buy minority stakes in regional businesses and form a holding company
19/09/2022
The asset management group Fortune One, especially focused on private equity, has been analyzing the purchase of minority stakes in retail construction businesses to create a holding company in the segment. The goal is to close partnerships with regional retailers, keeping the controlling shareholders in management, and become a consolidator business in that sector, the company says.
The plans began to gain strength last year, after the strong acceleration in sales in the first year of the pandemic, in 2020, in an environment of high dispersion of those businesses across the country, which favors consolidation projects.
Studies carried out by the fund (led by Waldir Abreu, current head and former superintendent of Anamaco, the sector’s national association) show that 66% of the stores in Brazil have up to four employees. Only 14% have more than 100 employees and two thirds are in the first generation, that is, the management is not young.
Valor has learned that there were two initial contacts with chains, and at least seven businesses were identified internally by investors with a profile to be approached to seek an agreement. This group includes the networks Cassol (Santa Catarina), Todimo (Mato Grosso), Amoedo (Rio de Janeiro), Chatuba (Rio de Janeiro), Balaroti (Paraná), ABC da Construção (Minas Gerais) and Carajás (Alagoas). The last two have already been probed by the fund, Valor found out. ABC has not manifested itself and Carajás denies the contact.
Fortune One does not comment on possible agreements but confirms that the initial phase of mapping and market studies has already been completed.
“There has been an advance in the operating model of the networks in this sector in recent years. There is an understanding that, to achieve consistent growth, it is necessary to join forces and create a national scale. There is also maturity and openness to negotiate”, says CEO Marcos Costa.
According to him, there is currently R$300 million available in an investment fund registered at B3 for business capitalization. Those resources are expected to reach R$1 billion by the end of 2022, and R$5 billion by the end of 2023. “The intention is not to seek business in isolation, closing one or another deal separately, but a larger partnership with regional businesses.”
Mr. Costa affirms that, in case this project moves forward, the fund would exit the investment by means of an IPO of the business created or would negotiate with a buyer group.
According to an investment advisor who has been in contact in the past with regional store chains, there may be an interest in selling minority stakes because the chains felt an increase in leverage with the recent rise in interest rates. He points out, however, that there is still some resistance among controlling shareholders, and it is not a simple model to be implemented. However, a cash offer, which generates liquidity for partners who want to leave the business, weighs favorably.
“The problem is that it is difficult to set up this holding model with different companies because, even if they keep their regional management, there are disagreements about national strategies, and not always a merger that maintains the autonomy of the chains generates such strong synergies,” he says, recalling unsuccessful attempts to create holding companies in pharmacy and electronic retail.
In Brazil, the movements of the last decade involve the entry of Chilean Sodimac in the country, with the purchase of Dicico in 2013, and the acquisition of Tumeler by Telhanorte in 2017. This year, until July, the sector’s sales fell 8.3%, after a high of 4.4% in 2021, according to the statistics agency IBGE.
In the evaluation of Mr. Abreu — head of the fund and one of the executives in charge of this project — there were advances in the chains in terms of systems and management from ten years ago, which facilitates integrations, and there are stores that have already reached their ceiling of regional expansion, which ends up leading to the search for new agreements. In parallel, Mr. Abreu observes that another possible path is the formation of real estate funds with assets from the chains that associate. The stores would be sold to them. who would rent them to the retailers.
At this moment, Anamaco Bank — a digital bank created in partnership with Anamaco and opened this year — is in operation. The bank started to offer credit through investment funds (FIDCs) to the networks associated with the entity, which licensed the use of the brand to the institution. It was a first step towards approaching this market.
Fortune One, the Brazilian manager of partners Sadao Isuyama and Mr. Costa, bought Ícone Investimentos in 2020 to accelerate the structuring of local funds. The company also has a branch in the United Kingdom for international business.
*By Adriana Mattos — São Paulo
Source: Valor International