Walmart is selling 80% of Walmart Brazil to private equity firm Advent International. Walmart entered the Brazilian market 22 years ago, and Walmart Brazil today has 438 stores in 18 states, with 55,000 associates. The moves is part of the company’s rebalancing of its international portfolio as it seeks growth.
Walmart will record a non-cash net loss due to cumulative foreign currency translation losses that it estimates will ring in as $4.5 billion – “the final loss could fluctuate significantly due to changes in currency exchange rates up to the date of close.”
Reuters noted Walmart’s focus on investing in growth markets like China and India, reporting that it is trying to catch up with competitors such as Aldi and Amazon in key international markets. “The retailer’s underperforming international business made up less than one-quarter of total revenue of $500.3 billion in fiscal 2018,” Reuters stated.
Press release follows:
Walmart Inc. and Advent International, one of the largest and most experienced global private equity investors, announced that Advent has agreed to invest in a majority stake in Walmart Brazil to strengthen the business and position it for long-term success. Under the terms of the agreement, Advent will hold 80 percent of Walmart Brazil, and Walmart Inc. will retain the remaining 20 percent upon the completion of the transaction. The transaction is subject to regulatory approval in Brazil.
“We have been in Brazil for over 20 years and are excited about this partnership with one of the country’s leading retailers,” said Patrice Etlin, a Managing Partner at Advent International in Brazil. “We believe that with our local market knowledge and retail expertise we can position the company to generate significant results and reach new levels of success in Brazil. We plan to invest in the business, work with the Walmart Brazil management team, associates, Walmart and our industry advisors to create a more agile and modern company to accelerate its development and improve the customer experience.”
Advent is a global private equity fund with a strong local presence and extensive experience in retail investment both in Brazil and internationally. Since the opening of its São Paulo office in 1997, the fund has invested in 30 Brazilian companies from various sectors. Advent has been active in the retail, consumer and leisure segments worldwide for 28 years and has completed 75 investments in 22 countries.
“Walmart is committed to building strong, resilient businesses that continuously adapt to local customers’ needs in a rapidly changing world,” said Enrique Ostale, EVP and CEO of Walmart UK, Latin America and Africa. “We will retain a stake in Walmart Brazil and continue to share our global retail expertise, giving our Brazil business the best opportunity for long-term growth, providing opportunities for associates and low prices for customers.”
The decision to partner with Advent in Brazil results from a thoughtful and deliberate review of Walmart’s international portfolio. As a result of the transaction, Walmart expects to record a non-cash, net loss of approximately $4.5 billion as a discrete item in the second quarter. A significant portion of the net loss is due to the recognition of cumulative foreign currency translation losses and the final loss could fluctuate significantly due to changes in currency exchange rates up to the date of close. Following an anticipated close later this year, Walmart expects no ongoing material impact to EPS in the current fiscal year and a slight positive impact next fiscal year.
Walmart was advised by Goldman Sachs & Co. LLC., and Advent International was advised by Credit Suisse and Euro Latina Finance.
About Walmart Brazil
Having a presence in Brazil for the last 22 years, Walmart Brazil has today 438 stores in 18 states, with 55,000 associates. In 2017, the company’s total sales were more than R$25 billion.
SOURCE: Walmart Press Release