Walmart cutting Brazil interest
Deal gives retailer 20% stake,Advent equity keeps rest
Walmart Stores Inc. is selling its majority share of Walmart Brazil as the company continues to shift its retail stance abroad.
The Bentonville-based retailer said Monday that private equity investment firm Advent International is buying a majority stake in Walmart Brazil. The deal calls for Advent to hold 80 percent of Walmart Brazil with Walmart Inc. holding the remaining 20 percent. The move must be approved by regulators in Brazil.
Walmart did not report the deal’s value and said in a news release that it will report a non-cash, net loss of about $4.5 billion as a discrete item in its second quarter as a result of the deal. The final loss could fluctuate significantly because of changing exchange rates. Walmart said earnings per share won’t see an ongoing impact for the current fiscal year and should see a small positive effect next year.
Walmart shares closed at $85.42, up $2.43 or nearly 3 percent in Monday trading on the New York Stock Exchange. Shares have traded as low as $73.13 and as high as $109.98 over the past year.
Advent was founded in 1984 and has $42 billion in assets under management, according to the company. It has offices on four continents and has invested in equity deal in 41 countries as of the end of 2017.
“We believe that with our local maker knowledge and retail expertise we can position the company to generate significant results and reach new levels of success in Brazil, Patrice Etlin, a managing partner at Advent in Brazil, said in a statement.
At Walmart’s annual shareholders meeting in Bentonville last week, Judith McKenna, Walmart International chief executive officer, answered questions about the possible sale of Walmart Brazil.
“We have said consistently we’re going to be thoughtful and deliberate about the portfolio and the choices that we make and each market has unique solutions,” she said. “We said it in Q1 results … that we were reviewing options in Brazil and that still remains the
case.”
The deal comes as Walmart continues to shift its overseas operations, with its strategy focusing more on individual markets rather than simply retail growth across a broad front.
In late April, Walmart said it planned to sell a majority stake in its United Kingdom supermarket operation, Asda, in a joint venture deal valued at $10.1 billion. Walmart retained a 42 percent stake of its 600-store Asda chain as part of the move. Walmart acquired Asda 20 years ago. In August of 2016, Walmart’s Mexico operation sold the Suburbia clothing chain in an $852 million deal.
Brian Yarbrough, a retail analyst with Edward Jones, said Walmart’s move with Walmart Brazil isn’t a surprise and is part of the company’s shifting focus on its key international markets — China,
India, Canada and Mexico. He said it’s clear the retailer is no longer interested in investing in a lot of markets that deliver just ho-hum returns.
“It’s time to put their money where they can get better returns,” Yarbrough said.
Walmart Brazil operates nearly 500 stores in 18 states and one Federal District and as of January 2017 employed nearly 60,000 workers, according to the company’s website. It runs stores under several banners including BIG, Hipper, and Mercardoramma as well as Walmart and Sam’s Club.
Walmart operates about 6,300 international stores across 27 countries, including the Asda stores. International stores make up about half of the company’s total stores but only accounted for about 25 percent of Walmart’s $500 billion in revenue on fiscal 2018.
Walmart’s recent international moves haven’t all been sales.
In May, Walmart acquired a majority stake in Indian ecommerce
company Flipkart. Walmart will pay $16 billion for a 77 percent stake in Flipkart, the retailer’s largest acquisition on record. At last week’s annual shareholders meeting, Walmart’s top brass said buying Flipkart gives the company access to its rapidly growing customer base in India.
Last week, as part of the company’s shareholders meetings, Walmart President and CEO Doug McMillon said international operations are an ongoing part of the company’s overall strategy.
“We’re working hard to set the Company up for success whether that’s in our core operations, investing in Flipkart in a growth market like India or in our desire to combine Asda business with Sainsbury’s in the UK,” he said. “We continue to be strategic and thoughtful about our portfolio. At the same time, we manage our business to deliver results today. We’re making big changes and they are the right changes to deliver long-term growth.”