Pepkor, the largest fashion retailer in South Africa, with more than 5,500 stores in ten countries, controlled by Steinhoff International, has acquired 87% of Grupo Avenida, one of the largest fashion chains in the Center-West and North of the country formed by 110 stores of Avenida fashion retailer and 20 of shoe retailer Giovanna Calçados.
The foreign company did not disclose the exact value of the deal, which was around R$1.1 billion. The stake was acquired from funds of the manager Kinea, which is leaving the company after almost eight years, and the founding family, which kept 13% and will continue to manage the operation.
Part of the capital will go into the company’s cash flow, with part going to expansion projects, especially in areas already explored by the group.
Pepkor will face challenges in Brazil, such as a complex tax system and a highly fragmented and still informal market in many regions. “They operate in markets that have gone through wars, and we will continue in management [for seven years]. I don’t think there should be any problems for them [to settle] here,” Christian Caseli, chairman of the board of Grupo Avenida, told Valor.
With no progress on the initial public offering plan, after the market worsened last year, and with Kinea interested in exiting the business, Grupo Avenida and Pepkor began lining up a deal in 2020.
The Caseli family — formed by Ailton Caseli, founder of the company, Christian, Rodrigo, and Giovanna — previously held 51% of the common shares and 45% of the total capital. They will stay in the management of the operation for seven years.
This move is the entry into the country of Pepkor and its parent company, owner of the furniture and appliances chain Conforama and mattress retailer Mattress Firm Group. Pepkor Holdings is South Africa’s largest apparel retailer, with a market capitalization of $5.3 billion.
“They have extensive knowledge of integration processes and synergy gains because they have led an expansion in Poland and Australia,” said Mr. Caseli. In 2003, Pepkor entered the Polish market through the acquisition of Pepco.
Avenida is one of the largest fashion retail chains in the Center-West and North of Brazil. In 2020, it had revenues of R$641.3 million, down 5.3% year-on-year, impacted by the post-pandemic crisis. It also had a net loss of R$51.1 million, versus a profit of R$25.3 million in 2019. Net debt remained stable at around R$161 million.
Grupo Avenida had preliminary sales of R$773 million ($146.90 million) in 2021.
The operation involving the sale of the leading chain in the Center-West is the first transaction of foreign groups in the most affordable fashion segment (and with greater scale) in almost 24 years. The American JC Penney entered the country in 1998 after buying a stake in Renner, and left Brazil in 2005. The Dutch C&A has been in the country since 1976. All the other publicly and privately held leaders (Pernambucanas, Renner, Riachuelo) have local control. Several other companies have tried to occupy the Brazilian market but failed. Competition is strong with the informal market and with Asian sites.
Source: Valor International