Casino raises stake in Grupo Pão de Açúcar

The French retail group increased its stake in Grupo Pão de Açúcar, Brazil’s leading retailer, which it owns with the Diniz Group, from 33.7 per cent to 37 per cent. The move demonstrates Casino’s “continuing commitment towards GPA and its trust in its executive team”, the retailer said in a statement on Thursday.

Casino filed a request for arbitration against its Brazilian partner two weeks ago amid media reports that domestic rival Carrefour is considering a merger of its own Brazilian business with GPA and speculation that Abílio Diniz, GPA chairman, could enter into talks.

“One suspects it is more of an olive branch than a warning over Carrefour,” one analyst said of the stake increase.

Daniela Bretthauer, an analyst at Raymond James in São Paulo, also said the move was purely symbolic and a way to keep the Diniz Group on board. “It’s just a way of saying ‘I’m going to fight for my rights here but let’s still be friends’.”

Nevertheless the request for arbitration still stands, Casino said.

Casino’s acquisition of shares could also be a less friendly signal to the Diniz Group that it plans to exercise its option to take voting control next year, said Cauê de Campos Pinheiro, an analyst at SLW Corretora in São Paulo.

“They’re showing that they have no intention of leaving the company and they really do plan on getting control,” he said.

Casino has an option to increase its stake to 41 per cent next year, a move that would allow it to take voting control.

Thursday’s increase does not change the corporate control of GPA, which is exercised through Wilkes, an investment holding company through which Casino and the Diniz Group decide on management and strategy. Casino denied the suggestion that the decision to raise their stake was because GPA’s share price had recently declined.

“It is not a short-term opportunity but really a strategy decision,” it said.

The Brazilian market is a key driver of growth for the French group. GPA had more than 1,600 stores in Brazil at the end of 2010 and full-year sales rose 13.1 per cent on a like-for-like basis.

GPA confirmed that Casino had increased its stake but declined to comment further.