Casino - Implications from the Via Varejo sale

All,

The share auction of GPA’s 36% stake in Via Varejo cleared at BRL4.90 / share or Euro 526 million in cash.

Valuation: 

Shares of GPA have not recovered their value since before the announcement of impending asset sales in early May. So there is no valuation impact on Casino or Rallye at this time. 

Liquidity: 

Directly and indirectly Casino hold 33.1% in GPA, meaning that at least technically E174m of cash would proportionally accrue to Casino or half of that E88m to Rallye. More practically it could mean however that if GPA have no need for the cash on their own at the moment (not likely ranking at the top of Naouri’s priorities these days), then it could dividend the proceeds out to its shareholders. 

Specifically, that would allow for the pay-down of half the E400m margin loan in Segisor and result in a E22m cash dividend directly to Casino. 

Assets for Sale:

So thus far, the effect on Casino is limited, but the sale of Via Varejo was a necessary first step in “cleaning up” the South American structure. Overall, Casino hold a market value of E2.5bn in securities which do not result in any material cashflow to the mothership and which therefore form a corner stone in Naouri’s bid to delever the group / retain control. 

Context:

For a sense of proportion, the liquidation of these holdings together with cash in France and any resulting dividend could pay down all Casino debt through 2024, leaving (only) some net E2bn on the balance sheet (on a French business with negative FCF…), followed by another E3bn in its 52% holding Rallye (never mind the holdings above). Going by France Retail revenues the structure would be ~45% levered, which in historical context for a dominant retail conglomerate approx. represents EV (if it's making money).

Anyhow, got carried away. All that happened so far is that GPA sold its stake in Via Varejo. But it's a start.

Wolfgang