Even with the announcement of the purchase of Kabum, computer e-commerce and gamer universe products, for R$ 3.4 billion, Magalu still needs the approval of the Administrative Council for Economic Defense (Cade), the body that regulates mergers and acquisitions in the Brazilian market. Last week, the board asked the retailer’s main competitors, such as B2W — which owns Submarino and Americanas —, Via Varejo and Amazon to give their opinion on the impact of the operation on the market.
Magalu bought Kabum paying R$ 1 billion in cash in the biggest acquisition in its history. In addition to the initial amount, the company will transfer over 75 million common shares (MGLU3) to shareholders of the informatics e-commerce, approximately R$ 1.7 billion. A third step involves the payment of over 50 million shares — totaling R$3.4 billion.
However, despite announcing the purchase, both companies depend on the endorsement of Cade, who asked competitors to position themselves on the sale of assets last week. If confirmed, Magalu buys all the share capital of Kabum, its US subsidiary (Kabum E-Commerce North America LLC) and electronic sports team, Kabum E-sports.
Amazon and B2W must provide revenue from IT items
Amazon, B2W — owner of Submarino and Americanas — and Via Varejo — owner of Casas Bahia and Ponto (formerly Ponto Frio) — must send a document to the agency containing the GMV (Gross Merchandise Volume) of computer product sales, such as computers, peripherals and IT products, and electronics, which include the category of computing and telephony items, audio and video electronics, video games and “connectivity”, automation, smart home, security and cameras. Cade also requires that the billing of these two categories together be informed, both for direct sales in its own e-commerce and in the marketplace — a sales platform for third parties.
Cade claims that asking for information and the opinion of competitors is a standard procedure for evaluating acts of concentration — acquisition of 100% of a company’s assets — in any economic sector. “Cade observes, among other issues, the market share of the companies involved in the operation; whether or not there is rivalry on the part of competitors; in addition to other aspects related to the sector under analysis”, said the agency in a note to the Techblog.
The board still requires companies to submit an analysis of Magalu’s purchase of Kabum and whether it could harm competitors. B2W, Amazon and Via Varejo must submit documents and responses by August 6th.
Via Varejo, owner of Casas Bahia, asks Cade to postpone
The owner of Casas Bahia and Ponto asked for this deadline to be postponed for another 10 days. In an email sent to CADE’s General Procedural Coordination, the retailer’s legal representatives requested that the delivery of the required document be extended to August 16th. The reason would be the volume of information required.
A source close to the negotiation says that Via Varejo’s request is unusual: the company should have this data in hand. In this case, there is speculation that it really is for bureaucratic reasons, as the retailer itself claims.
Regarding Via Varejo’s request to extend the deadline, Cade said that it will respond “in the course of the proceedings, after analyzing the request.” O Techblog sought out the company, which did not speak out due to the “silence period”; it releases the 2nd quarter financial results on the 11th.
On the other hand, it is not known how each retailer should pronounce on the purchase of Kabum by Magalu. When the acquisition was announced in July, it became public that B2W was close to negotiating the acquisition of computer e-commerce.
Magalu says it is “confident of approval of the acquisition”. Amazon declined to comment on the case. B2W did not respond to the report of the Techblog by the deadline.
Collaborated: Everton Favretto