Grupo Pão de Açúcar has just hired banks for a R$1 billion share offering that will be used to further reduce its leverage.
GPA hired Itaú BBA and BTG to analyze the feasibility of the offer and BR Partners as financial advisor for the operation.
The offering will be 100% primary with all resources going into the company’s cash flow.
According to GPA, all the capital raised will be used to reduce the company’s debt, which has been one of its priority focuses since CEO Marcelo Pimentel took charge in April last year.
Since then, the retailer has carried out a sale and leaseback of 11 stores, raising R$300 million, and sold two plots of land for another R$300 million.
More recently, it reached an agreement to sell its 13.3% stake in Éxito for R$800 million, and its 34% stake in Cnova for R$50 million.
GPA’s leverage ended the third quarter at 2.5x EBITDA, without considering the sale of Éxito and Cnova. At last week’s Investor Day, CEO Marcelo Pimentel said the plan is to cut leverage in half by the end of next year.
The offer is expected to generate brutal dilution for shareholders who did not participate in the offer. As the desired value is practically equivalent to the market cap current company value of R$1.17 billion, the dilution will be close to 50%.
In the document, GPA also said that it will call a shareholders meeting for January 11th to approve the capital increase and to propose a new board of directors “conditional on the settlement of the potential offer.”
According to GPA, the ticket was aligned between the company’s management and its current controller, the French Casino.
The panel will be made up of nine members, six of whom will be independent.
The new independent members are: José Luiz Gutierrez, Márcia Nogueira de Mello, and Rachel de Maia. Casino appointed Christophe José Hidalgo and Philippe Alarcon and Eleazar de Carvalho Filho, Luiz Augusto de Castro Neves, Renan Bergmann and Marcelo Pimentel were reappointed to the position.
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