SAO PAULO (Reuters) – GPA announced this Thursday the end of the Extra Hiper hypermarket banner, abandoning a segment of the market that has been facing difficulties in growing in the face of competition with cash-and-carry and the impact of the pandemic on consumers.
The end of the flag was reached in an agreement with Assaí, the cash and carry group of the French Casino, which is also the controller of GPA, according to a relevant fact.
Under the agreement, calculated at up to 5.2 billion reais, GPA will transfer 71 Extra Hiper stores to Assaí, which will be converted to cash and carry. GPA ended the first half with 103 Extra Hiper stores.
Assaí will pay 4 billion reais to GPA in installments maturing between December this year and January 2024. The remaining 1.2 billion reais will be paid to GPA by a real estate fund guaranteed by Assaí.
GPA did not give details about the fund, but stated that the fund will lease 17 properties that were previously owned by the company to Assaí for 20 years, renewable for the same period.
GPA has long sought to improve the results of the Extra hypermarkets banner, which has faced strong competition from cash-and-carry companies that include, in addition to Assaí, Atacadão, belonging to the Carrefour Brasil group.
Meanwhile, Assaí has been running an aggressive campaign to expand its stores, entering new states in the country at a time when the population’s income continues to be pressured by unemployment and high inflation.
In July, the president of GPA, Jorge Faiçal, said in a teleconference with analysts that the company would maintain the strategy that had been implemented in recent months, of reducing the prices of Extra Hiper products. The executive, however, stated that the objective was not to transform the flag into cash and carry, a format that had been driving the group until the split of Assaí earlier this year.
“The transaction was conceived under a clear rationale from the business and financial point of view, for both companies, with the potential to significantly create value for their respective shareholders,” stated GPA in the relevant fact.
With the deal, GPA further reinforces its focus on premium and proximity segments “notably with the Pão de Açúcar, Minuto and Mercado Extra banners, in addition to strengthening GPA’s leadership position in retail and food e-commerce in the country”, said Feisal, in the relevant fact.
The executive added that the “Extra Hiper banner will be discontinued” and the format stores that were not involved in the operation will be converted to other banners “with greater potential for profitability”.
According to GPA, as both companies are controlled by Casino, the transaction was approved “exclusively with the votes of the independent directors of GPA and Assaí”.
(By Alberto Alerigi Jr.)
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