Chile’s biggest retail firm has agreed to buy Brazilian firm Supermercados Bretas in what is expected to be the largest acquisition in five years. Cencosud SA, the Chilean retail giant will take over the Brazilian business in an investment that comes as its Chairman, Horst Paulmann’s biggest in a spate of five years.

The Chilean firm will remit an estimated 1.35 billion reals for the Brazilian investment. Supermercados Bretas is a privately held owner of 62 supermarkets, three distribution centers and 10 service stations. Supermercados Bretas is expected to double the Chilean firm’s foothold in Brazil. The Brazilian monthly retail sales went up by 10.4 per cent in August from 2009 and have been on the rise since December 2003, thanks to record low unemployment and credit expansion.

For Cencosud SA, the Brazilian investment marks yet another of its major investments, coming after the firm acquired a controlling stake in Empresas Almacenes Paris SA. Cencosud SA commenced its regional expansion strategy in 2009 as Chile’s economy begun a slowed recovery from its worst slump in a decade. But even so, the recovery has been impressive, with a comeback that shown great performance.

Led by its Chairman, as well as a controlling shareholder Paulmann, the firm spent around $1 billion buying up retailers in Brazil and Peru and expanding the Easy home improvement chain in Colombia before the global credit crisis slowed consumer spending in Latin America.

Bretas expects its sales to increase to 2.5 billion reais in 2010 from 2.1 billion reais last year, Cencosud said in a statement. Cencosud’s supermarkets, home-improvement stores and department stores employ about 100,000 people, around 10 times Bretas’s workforce.

The statement further added that with this strategic acquisition Cencosud enters the states of Minas Gerais and Goias, consolidating its position in Brazilian supermarkets, but did not reveal how it will finance the deal or name any investment banks involved. However, analysts said the Chilean retailer may utilize its cash reserves and raise debt without deteriorating its financial ratios.

Cencosud S.A. is a Chilean based multi-format retailer with operations in Argentina, Brazil, Chile, Colombia and Peru.  Through its supermarket, home improvement, department stores, shopping centers and financial services divisions, the Company targets a wide range of customers with the right combinations of products, prices and quality, designed to meet their growing demands.

18 Oct 2010.