The second offer that the Colombian banker Jaime Gilinski launched this week for the Éxito supermarket chain, and which was almost immediately rejected by its owner, Companhia Brasileira de Distribuição (GPA), after considering that “the price offered does not respond to adequate parameters of financial reasonableness for an operation aimed at a controlling interest and, therefore, does not respond to the best interest of GPA and its shareholders”, It will not be the last to be known in this new strategy that the Colombian investor has drawn up to take control of said trade.
(Also read: Owner of Almacenes Éxito rejects Jaime Gilinski’s second purchase offer)
“There is no doubt that other offers will come in which Gilinski will have to raise his offer if his goal is to achieve that 51 percent success rate or more,” said a consulted market analyst who believes that what investors can do is “test the ground” a bit, as he did when he made his first offers for Nutresa and Grupo Sura.
In GPA’s response yesterday to the Colombian banker and businessman’s proposal, its directives also indicated that the terms of the new offer, as presented, “do not provide sufficient elements to assure the Board of Directors of the binding nature of the new offer and the reasonable expectation of closing a transaction derived from it“.
(You may also be interested in: Banker Jaime Gilinski raises his stake for control of Éxito supermarkets)
low price
Images of the Colombian Stock Market today June 7, 2022. PHOTO MAURICIO MORENO EL TIEMPO CEET
According to the registry of the Colombian Stock Exchange (BVC), the Éxito share has an average price of 4,196.63 pesos this Friday.
However, an analysis carried out by the brokerage firm Casa de Bolsa indicates that the price offered by Jaime Gilinski to GPA for 51 percent of Éxito of 3,536 pesos, taking into account a representative market rate (TRM) of 3,991 pesos, it would be 14.8 percent below 4,150 pesos, the price at which it was quoted on the stock market at the time of the analysis.
And they would add that that same offer would be 26.8 percent below the target price of 4,830 pesos that the commission agent calculates that the value of the Éxito title should be on the stock market, and 28.3 percent less than the target price of the average analysts in the Bloomberg survey, with respect to the value of the company’s share.
What does Gilinski think of the GPA?
The Colombian businessman Jaime Gilinski insists on keeping control of the Éxito supermarkets.
As it is remembered, in its second attempt to gain control of the Colombian supermarket chain with a presence also in Argentina and Uruguay, James
Gilinski offered $586.5 million for 51 percent of the company, which represented a 33 percent increase in the price per share, reaching $0.886.
In his first bet, the Colombian banker and businessman was for 96.52 percent of the stake that GPA has in the company, for which he put 836 million dollars on the table, which would represent about 0.67 dollars per share. Both proposals have been rejected by Brazilians who consider them too low.
For Casa de Bolsa analysts, under these conditions, the Colombian “would be acquiring the shares at lower multiples than the current ones, since it would represent a Price/Book Value of 0.67x, while the implicit EV/EBITDA and EV/Sales multiples for the last 12 months would be 5.38x and 0.39x respectively, lower than the current ones,” he explains.
They also say that, taking into account that the Brazilian GPA acquired, at the end of 2019, 96.52 percent of Grupo Éxito for about 7.78 trillion pesos, under the assumption that 51 percent of the total shares of Éxito that this offer seeks are acquired directly from GPA, would give an IRR (return) of GPA’s investment in Grupo Éxito of 1.7 percent (including dividends in the calculation).
The 8 GPA requests to the banker
GPA’s board of directors ensures that, considering the level of segregation progress, a potential offer, to be considered, should meet the following minimum requirements:
1. Financial consideration reflecting the acquisition of a controlling interest.
2. Definitive contract of sale, including the non-requirement of indemnity obligations to Éxito shareholders other than those strictly established by law.
3. Termination Fees that represents a reasonable percentage of the proposed price and that is deposited in custody to encourage participation in conversations that could justify the cancellation or modification of the Éxito spin-off in the event that, for whatever reason, a possible transaction does not materialize (generating delays in the Éxito spin-off process currently underway).
4. Presentation of proof of financing to the offeror for the total amount of the price to be offered for the payment of the number of Éxito shares to be acquired, issued by one or several first level financial entities.
5. A clear schedule for execution of the transaction, in which all the steps, documents and approvals pertinent for the perfection of the transactions are detailed.
6. Pre-assessment of the nature of the potential antitrust review process and the schedule for the development of said review to which the transactions would be subject, if any, based on the Legal Opinion of a leading global or Colombian law firm.
7. Bidder Plan Guidelines for the development of Éxito’s business after the transaction, if perfected.
8. Commitment by GPA Support Option in any alternative that GPA may decide in relation to its remaining interest in Éxito, including the potential modification of the current terms of the business spin-off that leads to the delivery to GPA shareholders of part or all of the remaining interest in Éxito after the transaction; other alternatives for monetization by GPA of the remaining interest in Éxito, either before or after a potential new asset spin-off
