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The deal is a personal triumph for Dufry CEO Julián Díaz, pictured here at last November’s IPO when he first suggested that Brazil was a key target market |
BRAZIL. Dufry has signed a binding agreement to acquire the travel retail business of Brasif, the powerful Brazilian company, for a total consideration of US$250 million.
The acquisition, which is expected to be completed on the 23rd or 24th of this month, is a spectacular coup for the ambitious publicly-held Swiss travel retailer. Brasif is the leading duty free retailer in Brazil and has been present in the Brazilian travel retail market for more than 20 years. It operates 48 shops with a retail surface of approximately 12,000sq m and has close to 1,500 employees.
In addition Dufry has signed a binding agreement to acquire Brasif’s buying arm Eurotrade for a total consideration of US$250 million to reinforce its logistics platform in the Americas.
These two acquisitions will be jointly financed by Dufry (80%) and certain funds managed by the main shareholder of Dufry, Advent International Corporation (the remaining 20%).
Dufry, listed last November, was trading at CHF88 this morning. It made its debut on the Swiss stock exchange at CHF80.
Dufry commented: “With Brasif’s leading position in travel retail, high-quality concessions portfolio and in-depth knowledge of the local market, the transaction matches Dufry’s strategy of developing long-term concessions in emerging markets. This new operation is complemented by the strengthening of Dufry’s Americas’ logistics platform through the acquisition of Eurotrade.”
Dufry’s 80% stake in these acquisitions will be fully financed through a structured bank financing which will also provide Dufry with additional means for further expansion and growth.
Dufry commented: “Through these new acquisitions, Dufry reinforces its position as a worldwide leader in the travel retail industry in terms of sales and profits and shall have a presence in 33 countries, operations in more than 60 airports and a total workforce of about 6,000 people.”
The acquisitions are a personal triumph for Dufry CEO Julián Díaz González who expressed his hopes of entering several new markets, including Brazil, when the company launched its IPO last November. He said at the time: “Overall we have a wonderful opportunity ahead. There are a number of new terminals and new businesses that we could be operating over the next two years.”
One of those – and a major one – has just been delivered.
NOTE: This story was broken to the industry by The Moodie Report VIP News Alert, a news-breaking service dedicated solely to developments of major industry importance. It is sponsored by BPI.
COMMENT: Ever since the Advent International-led purchase of Dufry in early 2004, Latin America has loomed large on CEO Díaz’s acquisition list. And if you’re targeting Latin America they don’t come any bigger than Brasif. The Moodie Report understands that Dufry was not the only retailer in the race; its arch rival Aldeasa has also been in advanced talks with Brasif. But this time – unlike the failed acquisition of Aldeasa last year – Díaz has landed his target.
Here’s how The Moodie Report saw Brasif as a prospect for Dufry in our March 2004 edition:
Brasif is a powerful family company which was rumoured to be close to being sold in the late 1990s to DFS Group. The company has recently overhauled its retail operations under the respected leadership of Gustavo Fagundes and remains highly committed to the business. Brazilian businessman Jonas Barcellos is the primary shareholder. If – and it is a big if – the company is sold, a key question mark for any buyer would concern whether the highly-influential Barcellos would remain involved.”
Founded by Jonas Barcellos and Santos Fagundes 40 years ago (Barcellos holds around 88%, Fagundes the balance), Brasif has long been the region’s dominant player and since 2003 under the leadership of director Gustavo Fagundes has modernised its travel retail operation impressively.
As mentioned, the company was close to being sold in 1997 – DFS Group was believed to be the front-runner – but no deal was forthcoming. The long-time stumbling block to any acquisition was how the company would prosper if the highly-influential Barcelos ceased his involvement.
But with the airport contracts secure and Brazilian President Lula committed to doubling inbound tourism by 2007, the timing of this deal seems optimum. More tourists means a sharp acceleration of the departures business, complementing the traditionally strong arrivals sector. As Gustavo Fagundes told The Moodie Report last June (click here for full interview): “The number of foreigners visiting Brazil is really growing fast. The balance of Brazilians spending abroad against foreigners spending in Brazil has been changing a lot over the past year. This is very new and very good. In the past it was the opposite, Brazilians would spend much more abroad than foreigners would spend here.
“The most important location for us is São Paulo. It’s still growing, both in departures and arrivals. Departures are becoming a key driver of our business growth – for several reasons. The first one is that we are increasing our efforts to understand the international [non-Brazilian] traveller and to see what they want and how we can make our offering more attractive to them. Departures is now one third of our business and it’s still growing.”
Brasif’s key location – and its internal benchmark – is São Paulo Airport where it runs arrivals and departures stores and a successful destination merchandise operation. Then comes Rio de Janeiro; there it upgraded the stores considerably last year in order to offer the same portfolio breadth and depth as São Paulo.
In the north east a sharp increase in tourism, especially from Europe, created year-on-year sales growth of more than +30% in 2005. Again Brasif refurbished its Recife and Fortaleza airport stores last year.
It also has a strong online presence. Last November it launched its first virtual catalogue online. The stylish, vibrant and colourful site (www.dutyfreebrasif.com ) features the full product range, category by category, together with prices in US Dollars. The site was projecting 600,000 visitors a month by December 2005.
Gustavo Fagundes told Travel Markets Insider recently that Brasif operates 25 duty free stores in Brazil, plus two new Brasif Express concepts in São Paulo’s Guarulhos Airport, as well as nearly 20 duty paid airport outlets. It also has a diplomatic shop in Brasilia. The company’s estimated travel retail sales last year were US$250 million, the exact price Dufry and Advent will pay.
The house that Barcellos and Fagundes built is in good shape. Díaz has chosen his target carefully and will be a very satisfied man tonight.
MORE STORIES ON DUFRY AND BRASIF
DUFRY
Dufry Mexico inaugurates largest Americas project – 03/03/06
Dufry set to embark on major retail expansion as IPO drives growth strategy – 29/11/05
BRASIF
Victoria’s Secret Beauty extends travel retail presence with Brasif agreement – 20/09/05
