The biggest acquisition in Magazine Luiza’s history was approved by Cade (Administrative Council for Economic Defense). In July, the retailer bought Kabum, an e-commerce computer and gamer universe, for more than R$ 1 billion. According to the federal agency that regulates mergers and acquisitions, the purchase should not generate negative effects on the market and, therefore, received unrestricted approval.
Magazine Luiza bought Kabum for R$ 1 billion in cash, in addition to transferring 75 million common shares of the retailer on the stock exchange (MGLU3) to e-commerce shareholders, over a year and a half. A third stage of the acquisition involves the payment of over 50 million of the company’s shares by 2024. The total amount, therefore, would be R$3.4 billion.
Buying Kabum has low chances of negative impact
The document that evaluates the purchase reinforces Cade’s view that the operation has a low probability of generating a negative impact “on the competitive environment involving the online retail of products”.
To Cade, Magalu and Kabum claim that the acquisition would be beneficial for expanding the portfolio of products sold on the companies’ marketplaces. The retailer from Franca, in the interior of São Paulo, told the agency that the purchase would serve as an entry into a new category: its customers would have access to high-tech products, such as computers and gamer peripherals, in addition to high-resolution monitors.
For Kabum, the acquisition represents a “new phase”, as it would rely on Magalu’s logistics network for deliveries, which would lead to a drop in freight, notorious among IT e-commerce customers.
Kabum and Magalu operations complement each other, says Cade
Cade considered that, despite not presenting irregularities in most scenarios designed by the council, the purchase of Kabum by Magalu could harm competitors when it comes to the direct sale of electronic and computer products in e-commerce.
However, the agency dismissed the probability of this happening, because Kabum sells technology products with “higher average value” than its buyer – due to the profile of its activity, Magalu would not be its direct competitor, which attests to a relationship of “character complementary”.
To assess the impact of the operation in the marketplace industry — responsible for more than 50% of total e-commerce sales in 2020, according to Cade — the council called Magalu’s main competitors to give their opinion on the purchase: Americanas, Via ( former Via Varejo), Mercado Livre and Amazon. The agency’s assessment is that the acquisition of computer e-commerce should be competitive pressure on the 3P sector, which has Amazon, Mercado Livre, Via and Americanas among the biggest players.
Kabum earned over R$75 million in 2020
The purchase of Kabum was already approved by Magazine Luiza’s board in July. The company had signaled to the Techblog who was confident of Cade’s permission. Now, the agency must evaluate other aspects of the acquisition in the so-called post-operation, a common rite to continue analyzing the impacts on the market.
Magalu saw value in Kabum’s profitability and operating efficiency when acquiring the company. Computer e-commerce sales more than doubled during the pandemic period: an increase of 128% in 2020, a year in which the company recorded sales of over R$75 million.
In the first months of 2021, purchases on the site continued to rise, and the company closed the first half of the year with a 61% growth in sales. In a statement to the market, the CEO of Magalu, Frederico Trajano, stated that this type of profitability is not common in electronic retail. “This shows that the company is very much in line with Magalu’s philosophy, which also presents accelerated growth with sustainable results”, said the executive, in July.
The purchase of Kabum was the 22nd acquisition made by Magalu in a year and a half. Kabum should, according to the retailer, operate together with the Jovem Nerd channel, acquired in April, and with the Canaltech website, purchased in August 2020.
Collaborated: Everton Favretto