No 2. French Food Retailer Ups Stake in Brazil's CBD

SAINT-ETIENNE, France -- Casino Guichard Perrachon & Cie SA, the second-biggest supermarket company in France after Carrefour, has increased its stake in Brazil-based Cia. Brasileira de Distribuicao Grupo Pao de Acucar (CBD) to 34. 3 percent from 27.4 percent by paying approximately $587 million to share control of that country's top grocer, according to published reports. Casino's stake will eventually grow to 39 percent of CBD without any further payment by the French retailer.

CBD said yesterday that its chairman, Abilio Diniz, and Casino would each have a 50 percent voting stake in a new holding company that will run CBD. The deal stipulates that the holding will have a 65.6 percent controlling voting stake in CBD, equaling 28.8 percent of the total capital. Casino will own 12.6 percent of CBD's total capital, and Diniz and his family will own 33.2 percent.

Diniz, one of Brazil's wealthiest men, will be reelected chairman of CBD's board and nominated chairman of the holding's board, as well as having a decisive vote in CBD business operations. Augusto Cruz will remain CBD's executive president. According to the deal, Casino can nominate its own officials for the top board after eight years.

As a result of the deal, Diniz gets $200 million that he can convert into Casino stock, making him the company's fifth-biggest shareholder. CBD will receive $400 million to be reinvested in the company by purchasing real estate. The retailer said it intended to spend about $1 billion on opening 160 new stores in the period from 2006 to 2009.

Although its earnings per share in 2005 will improve only slightly, Casino expects the deal to "strengthen its growth profile for the years to come," according to the Associated Press.

CBD currently operates more than 500 supermarkets in Brazil under the Pao de Acucar, CompreBem, Sendas, and Extra banners. Observers had long expected Wal-Mart Stores Inc. to buy CBD, whose position as Brazil's No. 1 retailer is consolidated by the deal with Casino. Wal-Mart ranks third in Brazil, after Carrefour.

Bloomberg reported that Casino is the second French retailer in as many days to expand in emerging markets: Earlier this week Carrefour agreed to buy a controlling stake in a Turkish grocer to become that top food retailer.
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