No Casino OK, no Pao de Acucar-Carrefour deal-BNDES

July 3, 2011

22:34, Saturday 2 July 2011

* BNDES, gov’t enthusiasm cools for mega retail merger

* Casino (Paris: FR0000125585 – news) controls Pao de Acucar, ice-cold to deal

SAO PAULO, July 2 (Reuters) – The BNDES bank will not putup the $2.4 billion it pledged for the merger of Brazil’sbiggest retailers, Grupo Pao de Acucar and France’s Carrefour (Euronext: CA.NX – news) ,unless Casino is on board, bank president LucianoCoutinho said in a local magazine.

Coutinho told Brazil’s weekly Veja that “without agreement,the deal is off,” a statement which underscores a cooling ofthe bank’s and the government’s enthusiasm toward the mega-dealthat could create a retail giant with revenues of 65 billionreais ($42 billion) annually.

Casino is the controlling shareholder of Pao de Acucar but Brazilian tycoon Abilio Diniz remains thechairman, as well as a major stakeholder, of the companythrough a partnership agreement with the French retailer struckhalf a decade ago.

Casino has been ice-cold toward the deal that would make ita minority stakeholder in a company controlled by its archrival Carrefour and it has started arbitration proceedingsagainst Diniz for allegedly negotiating the deal withoutinforming it.

“Without an agreement between Pao de Acucar and Casino, theBNDES will not enter into the deal,” Coutinho said in the Vejainterview.

Although he said that he still believes in the merits ofthe merger, Coutinho’s statements indicate a more cautiousofficial government position on the deal than earlier in theweek, when the proposal was praised as a way to increase thesale of Brazilian goods abroad.

The deal fits the mold of the BNDES’ drive to createnational champions that have the scale to competeinternationally. The bank’s financing helped JBS gofrom being an obscure meatpacker in the backwaters of Brazil’sinterior to the world’s largest integrated meat company inlittle more than five years.

But local media, opposition lawmakers and analysts jumpedall over the Pao de Acucar-Carrefour proposal, questioningnearly every argument that the government and Diniz put forthas merits for the deal.

“Our proposal is to finance national leaders amongBrazilian companies,” Coutinho said. “This is a basic conditionfor us to participate in the project. But it’s too early tospeak of the details of the contract. We are still in thepreliminary stages.”

(Reporting by Reese Ewing; Editing by Eric Walsh)

No Casino OK, no Pao de Acucar-Carrefour deal-BNDES

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