Retail giant Wal-Mart Stores Inc. (WMT) is re-considering possibilities to acquire the Brazilian unit of French retailer Carrefour SA in order to expand its presence in Latin America. The unit is worth approximately 7 billion euros ($9.9 billion), as per the sources.
Walmart has been eyeing Carrefour’s Brazilian assets for the last two years, but has failed to acquire it owing to price disagreement. Walmart’s interest in Carrefour came recently after the latter dumped the proposed plan to combine its business with Cia. Brasileira de Distribuicao Grupo Pao de Acucar (CBD).
Since Walmart’s acquisition plans are premature, the company is working with advisers to examine the assets of Carrefour, which could be valued between $6 billion and $8 billion.
Investment bank UBS AG (UBS) is acting as the advisor for Walmart, while Machado, Meyer, Sendacz & Opice Advogados are acting as the law firms for the deal.
We remain encouraged by the company’s significant presence in the international market, as it gets about one-quarter of its revenue from its international operations and the rest from the U.S. Additionally, Walmart’s sales increased 4.4% in the first quarter, driven by a robust 11.5% growth in the International segment.
During May 2011, Walmart planned to invest 1.2 billion reais ($740 million) and open 80 new stores in Brazil in 2011, and hire about 7,000 people.
Walmart is scheduled to report its second-quarter earnings on August 16, 2011 and the Zacks Consensus Estimate is $1.08 per share.
Currently, Walmart faces stiff competition from Target Corp. (TGT) and Costco Wholesale Corporation (COST). It has a Zacks #3 Rank, implying a short-term Hold recommendation.
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