Brazil’s Pão de Açúcar gets rebuked by Casino, its local partner, when it approaches troubled Carrefour for a global merger.
BY THIERRY OGIER
Latin Trade Magazine
Then, within just six months, his group doubled in size thanks to two key 2009 acquisitions in the non-food market (Ponto Frio and Casas Bahia). But at almost 75, the still-ambitious Diniz, chairman of Pão de Açúcar (listed in
A detailed plan was unveiled in late June after weeks of speculation. With the support of the Brazilian development bank (BNDES), which would finance most of a 2 billion euro equity swap transaction, and the BTG Pactual investment bank,
Still, ministers supported the move. Fernando Pimentel, minister of industry and foreign trade, said the deal had “a strategic importance for
Finally, the grand scheme that he had been mulling for months with his close advisers, Percio de Souza from the Estater financial boutique, and Claudio Galeazzi, a partner at BTG Pactual and a former Pão de Açúcar
Indeed, Carrefour was up for grabs. Some of its key shareholders, the Arnault Group and Blue Colony, wanted out in order to recoup some of their losses, and the Brazilian subsidiary itself had been involved in a 550 million euro accounting fraud. It was a golden opportunity. The thinking was, if they did not do it, Walmart would.
It all seemed to be coming together. But that was before Groupe Casino weighed in.
If the Diniz deal went ahead, Groupe Casino, which first acquired a stake in
What’s more, French hypermarket firm Casino also happened to be Carrefour’s arch rival in
But to Diniz, it all seemed like a minor inconvenience. The former racing champ is the kind of businessman who does not take a “non” for an answer and he thought he would be able to twist Naouri’s arm. But Naouri, a former cabinet chief to the late French president François Mitterrand, is not one for turning. He accused Diniz of shifting the goalpost with the ball still in play. After Diniz and his financial advisers unveiled their plan in late June, he spoke bluntly of “expropriation.”
In an exchange of emails with Diniz he said there was no point in meeting him after such “dissimulation.” He felt cheated. In the late 1990s he had helped rescue the indebted Diniz business, which suffered greatly from the devaluation of the real.
Later, Naouri flew to
Eventually the Brazilian government backed down and the deal collapsed, but Diniz still thinks that he was misunderstood. On several occasions, he tried to raise the issue again with Naouri, to no avail. In spite of this, Diniz has continued to defend the plan in public. “Was it a great plan?” he asked before a managers’ audience during an Endeavor Institute event in
At the end of the day, the legendary Diniz may well have gone a step too far. The irony is that after the failed merger between Pão de Açúcar and Carrefour, Diniz and Naouri will still have to work together for some time. Indeed, Casino may be able to run the business by next June, but the contract also says that Diniz may remain as chairman of the board. The cold war is not over yet. In fact, it may just be starting.
This article originally appeared in the January/February issue of Latin Trade magazine.