Sonae SGPS Sells Brazilian Supermarket Business to Wal-Mart

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PORTO ALEGRE, BRAZIL- Modelo Investimentos Brasil SA, a unit of Modelo Continente SGPS SA, the retailing division of locally based conglomerate Sonae SGPS, has sold its supermarket business in Brazil to Wal-Mart Stores Inc. The $757-million (euro 635 million) transaction nets Wal-Mart 140 hypermarkets, supermarkets and wholesale stores in the country.

The supermarket business unit that changed hands was called Sonae Distribuicao Brasil SA. It has 20,000 employees and operations in Sao Paulo and in three states in southern Brazil–Rio Grande do Sul, Santa Catarina and Parana.

“We expect to learn a lot from Sonae that will help us improve further our business in Brazil,” says Vicente Trius, president of Wal-Mart Brazil. “We are looking forward to getting to know the habits of the local customers and to strengthen relationships with the regional suppliers.”

One of Sonae’s lessons is that you need a lower cost of capital than it had in order to make it work. In a statement to CMVM, the Lisbon stock market regulator, Sonae says the decision to divest was influenced by “the difficulty the business has had in attaining profitability levels in excess of the high cost of capital employed in that country.”

With the 140-store chain in hand, Wal-Mart Brazil now operates 295 units in 17 of the country’s 26 states. In 2004, Wal-Mart acquired the 118-store Bompreco chain in northeastern Brazil from Dutch retailer Ahold. Add to that Wal-Mart’s September acquisition of a one-third interest in Central American Retail Holding Co. (CARHCO), that region’s largest retailer, and Wal-Mart officials say they have “significantly strengthened” the company’s position in Latin America.