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Pão de Açúcar, Brazil’s biggest supermarket chain, has agreed to buy Casas Bahia, the country’s biggest electrical and household goods retailer, to create a group with combined sales of R$40bn ($23bn) a year.

The deal marks a further expansion into non-food retailing for Pão de Açúcar and its first big move into Brazil’s fast-growing lower-income market, which has driven the country’s growth recently and helped it emerge relatively unscathed from the global economic crisis.

No value was put on the deal, under which a new non-food retailer will be formed from two electrical goods chains owned by Pão de Açúcar – Extra Eletro and Ponto Frio – and Casas Bahia.

Pão de Açúcar’s assets are valued at about R$1.35bn and Casas Bahia’s at about R$1.29bn. Pão de Açúcar will own 50 per cent plus one share of the new company and appoint its financial director. Casas Bahia will own the rest and will run its commercial operations.

Both companies are family businesses currently run by the sons of their founders. Michael Klein, Casas Bahia’s financial director and grandson of the founder, will be the new company’s chief executive.

Pão de Açúcar has 1,242 stores and had sales of R$26bn in 2008, while Casas Bahia has 513 stores with sales of R$13.9bn. Together, they are bigger than the combined Brazilian operations of Walmart and Carrefour, Pão de Açúcar’s biggest rival.

The new company will have 1,015 stores and annual sales of R$18.5bn, the companies said.

The announcement was made on Friday, a week earlier than expected after Abílio Diniz, president of Pão de Açúcar, was called back to Brazil in mid-flight on his way to Paris following abnormal trading in shares in Globex, which owns his group’s non-food retail assets.

Globex became Brazil’s second-biggest electrical goods and furniture retailer after it bought Ponto Frio in July.

But its sales were concentrated among higher- income consumers.

“I felt very envious when I saw that Casas Bahia had opened a store in the favela of Paraisópolis,” Mr Diniz said.

Casas Bahia opened the store in one of São Paulo’s biggest shantytowns a year ago, at the height of the global crisis.

It was the chain’s first store in a favela and served as a symbol of the resilience of Brazil’s low-income consumers to the economic downturn.

Brazil’s services sector survived the global crisis without going into recession. The wider economy is expected to grow by about 1 per cent this year and by at least 5 per cent next year, driven by robust domestic consumption.

Copyright The Financial Times Limited 2017. All rights reserved.
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