Grupo Pão de Açúcar (aka Companhia Brasileira de Distribuição – CBD), Via Varejo (VVAR11:BR) and French group Casino Casino Guichard-Perrachon (OTC:CGUIF) (OTCPK:CGUSY) have announced a joint venture to create a giant new e-commerce company: Cnova.
CBD and Via Varejo will own 53.5% of the new company, while the remaining 46.5% will belong to Grupo Casino. The French group has already filled for an IPO of the new company in the US.
Cnova is born as one of the largest e-commerce companies in the world, with a volume of goods nearly US$5 billion, based on data from 2013. The company will have a large presence in France, Colombia, Thailand and Vietnam through the Cdiscount websites, besides Brazil, with Extra.com, CasasBahia.com and Pontofrio.com, sites operated by Nova Pontocom, a company owned mainly by CBD and Via Varejo.
According to the companies’ release, the success of Cnova will be based on a business model of low cost operations, attractive prices, a wide variety of products and delivery solutions and highly differentiated payment.
Cnova will have two co-presidents, and one will probably be the current president of the Nova Pontocom, Germán Quiroga Pasquale, while the other will be the president of Cdiscount.
Moreover, the company’s board will consist of 9 members, 3 appointed by Casino, including Jean-Charles Naouri – president of Casino and who will be the chairman -, 2 members shall be appointed by Pão de Açúcar, 1 by Via Varejo, while the other two members will be independent. Finally, the two co-presidents will switch in the position that remains on the board.
While the news is positive in general, Via Varejo, the brick-and-mortar side of CBD, may end up with the worst part of it. If Cnova gets the same buying power that Via Varejo has and transfer this benefit to the end consumer, there may be serious cannibalization of the physical stores from Via Varejo. Casino has reportedly always wanted to do an IPO of its global operation with the intent of extracting value from Nova.com, the online arm of CBD, which Casino partly owns.
In 2013, Nova.com had a revenue of BRL 4.8 Billion (approximately US$ 2 Bi) versus BRL 25 Billion from Via Varejo. This number could change drastically in the mid to long term, which would be neutral for Casino and CBD but negative for Via Varejo.
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