Carlyle adds to Brazilian portfolio with Tok Stok buy

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It’s a story that never seems to get old – the rise of the Brazilian middle classes.

Despite the recent pessimism over growth and concerns about rising household debt, consumer companies in the Latin American country never fail to get investors excited.

Carlyle, the US private equity group, is a particular fan of the sector and on Thursday added yet another name to its bulging Brazilian portfolio.

The group bought 60 per cent of Tok Stok, Brazil’s answer to Ikea, paying (according to people close to the deal) about R$700m ($346.5m).

Ghislaine and Régis Dubrule, the French couple who set up the company in São Paulo about 34 years ago, will retain 40 per cent ownership.

According to Daniel Sterenberg, a director at Carlyle, the group originally met the owners in 2008. After they decided to sell a majority stake and hired local bank BTG Pactual to handle the process at the end of last year, Carlyle decided to try its luck in the bidding process.

This from Sterenberg:

We have been analysing the furniture sector for quite a while now. The first reason that we like the sector is that when you look at consumption per capita on furniture it’s only about $56 per year in Brazil. Meanwhile, in mature markets it’s about $200 or $300.

Consumption of furniture rises as people’s income increases. Another reason is that the sector is very fragmented.

The investment, which Carlyle said will come from its South America Buyout Fund, ranks as its sixth in the country since 2008. The group already owns CVC (a tourism company), Qualicorp (a health plan broker), Scalina (a lingerie manufacturer), Grupo Orguel (an equipment leasing company) and Ri Happy (Brazil’s largest chain of toy stores).

Goldman Sachs has also shown a renewed interest in private equity deals in the country recently, promising to make a comeback in Brazil after years away from the deal-making table.

However, Goldman is unlikely to be treading on Carlyle’s toes too much. According to Bloomberg earlier this month, the bank will instead be targeting sectors such as infrastructure and telecommunications as a play on another of the country’s much-loved investment themes - preparations for the World Cup and the Olympics.

Related reading:
Private equity in LatAm: less new money, more deals, beyondbrics
Carlyle: betting on toy shops in Brazil, beyondbrics
Carlyle, the new EM cheerleader, beyondbrics
Private equity homes in on Latin America, FT

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