Walmart in Deal to Sell Brazil Holdings

Walmart’s reshaping of its international portfolio continued Monday when the retailer announced it would sell a majority stake of its struggling operations in Brazil.

The private equity firm Advent International will acquire 80% of Walmart Brazil, while Walmart will retain a 20% ownership stake, the retailer said.

A purchase price was not disclosed but Walmart said it expects to record a non-cash, net loss of approximately $4.5 billion in the current quarter as a result of the deal. A significant portion of the net loss is due to the recognition of cumulative foreign currency translation losses, and the final loss could fluctuate significantly due to changes in currency exchange rates up to the date of close.

Following an anticipated close later this year, Walmart said it expects no ongoing material impact to earnings per share in the current fiscal year, and a slight positive impact next fiscal year.

“Walmart is committed to building strong, resilient businesses that continuously adapt to local customers’ needs in a rapidly changing world," Enrique Ostale, EVP and CEO of Walmart UK, Latin America and Africa, said in a stateemnt. “We will retain a stake in Walmart Brazil and continue to share our global retail expertise, giving our Brazil business the best opportunity for long-term growth, providing opportunities for associates and low prices for customers."

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Walmart is trimming its global footprint in slower growing and problematic markets while expanding investment in places like China and India. Since the appointment of Judith McKenna as international CEO earlier this year, Walmart has announced deals to sell all or some of its operation in the United Kingdom and announced a $16 billion investment in India-based retailer Flipkart.

Brazil for a time was one of the company’s promising international markets and the source of some its early investments and personnel in ecommerce, but officials found its EDLP strategy a hard sell in the promotional Brazil market. The country has also experienced economic troubles in recent years.

Walmart operates nearly 500 stores in Brazil under several banners including BIG, Bompreço, Hiper Bompreço, Magazine, Maxxi, Mercadorama, Nacional, Sam’s Club, Hiper TodoDia, Supermercado TodoDia, TodoDia, Walmart and Walmart Posto.

Advent is a global private equity fund with a strong local presence and extensive experience in retail investment both in Brazil and internationally. Since the opening of its São Paulo office in 1997, the fund has invested in 30 Brazilian companies from various sectors.

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“We have been in Brazil for over 20 years and are excited about this partnership with one of the country's leading retailers,” said Patrice Etlin, a managing partner at Advent International in Brazil. “We believe that with our local market knowledge and retail expertise we can position the company to generate significant results and reach new levels of success in Brazil. We plan to invest in the business, work with the Walmart Brazil management team, associates, Walmart and our industry advisors to create a more agile and modern company to accelerate its development and improve the customer experience.”