As Arezzo&Co moves forward in recent weeks with a secondary offering to raise up to R$830 million, the company’s appetite for mergers and acquisitions caught the investors’ attention in the roadshows.
For this unprecedented offering, the first since the IPO, Arezzo presented an aggressive plan, which surprised even potential investors aware of Arezzo’s ambition to become a major “house of brands.” In the rounds, the company’s management team unveiled a list of top assets it is interested in, including retailers Renner, C&A, Soma (already with Hering, a battle Arezzo lost), Centauro and Amaro, two sources said. To get off the drawing board a large deal, the company has been sounding out assets, with no clear evolution so far. The model Arezzo has in mind for these “big” deals involves share exchange, cash and debt. “Soma is the company they want most,” a manager familiar with the matter said.
Arezzo has already looked deeper into C&A after the pandemic, but the talks did not move forward.
Two managers who were at the roadshows see a short-term deal with Amaro, Soma or Centauro/Nike as the most likely, considering synergic portfolios and a potential open door for negotiation.
As Arezzo has little debt, there is still room to strengthen the cash flow, if necessary, without leveraging the company so much. In the same vein, a greater dilution of the partners is not an obstacle, considering the eventual need for new offerings. Arezzo believes that it makes sense to be smaller in something much bigger.
Anderson and Alexandre Birman hold 45.8% of the company. The stake fell to less than 50% after Arezzo bought Reserva in 2020. So, in practice, both have already given up the paradigm of being controlling shareholders, sacred to many Brazilian family groups, in exchange for faster growth.
Regarding leverage, the net debt-to-EBITDA ratio was 0.5 times in September, above what was seen a year ago, but one of the lowest in the sector.
Despite the great expectation generated in the market, as Arezzo has so far not done business with brands of large Brazilian retailers with a nationwide scale, it remains to be seen how the company would combine cultures and governance in businesses with consolidated management. “It’s one thing to buy Reserva, it’s another thing to combine it with Renner,” an investment analyst said. Since Reserva’s acquisition, Arezzo has brought in smaller businesses, such as streetwear brand Baw and womenswear brand Carol Bassi. Still, the prevailing assessment is that the Birmans are focused on putting together this digital “lifestyle” fashion retail model in the short to medium term – and are unlikely to stop until that strategy moves forward.
In the fully primary follow-on offering, the base offering is for 7.5 million shares (about R$615 million at the current price) and could reach R$830 million, considering the additional lot of up to 35%.
Source: Valor international