L Catterton, the world’s biggest consumer-focused buyout firm, is in talks to buy a controlling stake in Brazilian high-end supermarket chain St Marché, which took on too much debt following an aggressive expansion, three people with direct knowledge of the talks said.
According to the people, five St Marché’s partners who hold as much as 70 percent of the chain are negotiating an all-cash deal with Greenwich, Connecticut-based L Catterton. The stake includes the 40 percent interest that they own in Eataly SRL’s Brazilian unit and an upscale grocery store, the people said.
Under terms of the deal, which are preliminary, L Catterton would pour around 200 million reais ($61 million) into St Marché and give the partners the right to increase their stakes gradually later, one of the people said. The money would go to help cut St Marché’s 260 million reais of debt, the people said.
The remaining 30 percent in St Marché is owned by billionaire N. Malone Mitchell’s Laço Management. According to one of the people, who asked for anonymity since talks are under way, one aspect getting in the way of the deal is the structure of the partners’ stakes, which include assets and other investments.
A press representative for St Marché said the chain is seeking to obtain fresh capital for a five-year expansion plan.
The transaction underscores the challenge facing high-end retailers in Latin America’s No. 1 economy, where ample consumer credit and a tight labor market fueled a decade-long spending boom that ended abruptly two years ago. Brazil is struggling with the harshest recession since the 1930s, record unemployment and defaults as well as the highest borrowing costs in a decade.
Analysts at HSBC Securities said last week that consumer spending is unlikely to return to pre-crisis levels soon, as a “new frugal consumer” pursues value and does more shopping online, putting pressure especially on supermarkets and appliance retailers.
St Marché, which was founded in 2002 by Brazilian entrepreneurs Bernardo Ouro Preto and Victor Leal, owns 18 stores across upscale neighborhoods in the city of São Paulo, Brazil’s richest, and surrounding towns. The company had about 30 million reais in earnings before interest, tax, depreciation and amortization as of last year, on revenue of 350 million reais, one of the people said.
L Catterton, which was created this year through a partnership between U.S. investment firm Catterton, luxury goods group LVMH Moet Hennessy Louis Vuitton SE (LVMH.PA) and the billionaire Arnault family, declined to comment.
L Catterton expected to increase assets under management to over $14 billion, pending the conclusion of several fundraising efforts, the firm said in February.