Magazine Luiza with an eye on becoming #2
Valor Econômico
The search of Magazine Luiza for new businesses in retail is essential for the furniture and home appliances chain headed by Luiza Trajano. After the latest acquisitions in the sector, involving its major rivals, such as Casas Bahia and Ponto Frio, the eyes of entrepreneurs and retail experts have turned towards this São Paulo retailer. Agreements with Lojas Maia and Lojas Colombo, which as verified by Valor, are being entered into with Magazine, would make the chain reach annual sales of R$ 6.1 billion (US$ 3.1 billion) (based on data of 2009), turning it into the second largest retailer of the segment in the country.
But the wrapping-up of the agreements under discussion will only be possible with some capital injection from a third party. The chain is short in cash for so many investments, after the heavy actions taken in São Paulo. As found out by Valor, Capital International, a shareholder of the chain since 2005, may continue in the capital of the company, giving up exercising its right of withdrawal, which would force Magazine to disburse nearly US$ 100 million to pay the fund for its shares. On the other hand, Magazine is negotiating the admission of a new investor, which could make a hefty injection of resources. A likely name would be the BTG Pactual bank. Magazine would also be studying the acquisition of two to three other regional chains besides Maia and Colombo.
The negotiations with Colombo is also bumping on the definition of relevant points. As a result of the operation outlined, one possibility is that entrepreneur Adelino Colombo stays with a minority share of Magazine Luiza. The hammer has not been hit though. All parties to the negotiations deny the conversations. When asked on the matter, Adelino Colombo said "there is not such a thing". Valor found out the entrepreneur has made it clear to the high management of the company he accepts a new partner, but he commented with those closest to him that a merger would only happen after analyzing every detail of an agreement.
In love with the business, the founder of the chain has no successors and he turns 80 in 2010, which news to circulate in the market on the possibility of new partnerships in the company. Unlike Colombo, Lojas Maia would be facing a more adverse financial situation, what made the company to seek a buyer for at least two years. The company denies the information. "I have nothing to say about it. That is not true", said the Director of the chain, Marcelo Maia, who is on a trip to the United States.