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Home appliance giant Magazine Luiza denies acquisition speculations

Brazilian giant home appliances retailer, Magazine Luiza, Wednesday denied speculations that it is in talks with its two rivals over a potential takeover. Speculation had been rife, particularly from the Brazilian newspaper, Valor Economico, that Magazine Luiza had entered talks to expand its business in the country by purchasing 100% stake in its rivals in the Brazilian retails consumer market, considered one of the fastest growing.

 

However, Magazine Luiza rejected the claims insinuating that it as well had capital injection plans for further expansions, in a move that pundits predict would increase competition in the country. Magazine Luiza had been speculated to be bidding for a takeover of Lojas Maia that has 140 stores, with robust operations in the Paraiba state in Brazil. According to current company estimates, Lojas Maia accrued revenues of $571 million in 2009.

 

The Brazilian magazine, credited with the reports, had said that talks for the potential investment were currently at an advanced stage between Trajano and rival Lojas Colombo, another giant retail company with a chain of stores and major operations based in Southern Brazil. The two companies however denied the reports through statements issued to media houses, reiterating no existence of any such talks.

 

However, the deals as speculated would see Trajano get fresh capital injection from BTG Pactual, a Brazilian securities company, said the paper.  The speculations over Magazine Luiza’s intentions come in the wake of the company’s lackluster investment in acquisitions as its rivals have gone into consolidations and acquisitions in the country’s growing home appliance market.

 

As it is, its rivals are merging in a bid to conquer larger market share faster, negotiate better prices with their suppliers and initiate expansion in areas outside their existing operations in Sao Paolo and Rio de Janeiro. In 2009 December, Grupo Pao de Acuar reported it had successfully purchased Casa Bahia, its rival in asset swap, concluded in July.

 

Other players in the country’s home appliances retail sector, Insinuante and Ricardo Electro as well announced they had gone into a deal to merge and make use of the growing demand for TV sets, freezers and other consumer appliances. Even so, a spokesman for Magazine Luiza said the company is keen on building an additional 20 stores in its chains this year, making its overall number of stores peak at 466. If the reports over its plans are anything to go by, Colombo’s majority shareholder, Adelino Colombo, may have to give up control of the chain in lieu of a small stake in Luiza Magazine.

 

14 July 2010.