Casino to buy out Cnova unit as Brazil forces U-turn

By Dominique Vidalon
PARIS, May 12 (Reuters) - Casino said on Thursday it would spend up to $196 million to take its e-commerce unit Cnova private, nearly two years after listing it on Nasdaq as difficulties in Brazil derailed plans to create a broad e-commerce business.

Casino said it would reorganise Cnova's troubled business in Brazil, merging it with another of its units, appliance retailer Via Varejo SA, and would refocus Cnova on France, the latest step in the French retailer's turnaround efforts.

The news, which confirmed earlier Reuters reports, lifted Casino shares by as much as 8 percent as investors welcomed reduced exposure to recession-hit Brazil. .
"This transaction is aimed at simplifying Casino' group structure and would allow Cnova to refocus through CDiscount on e-commerce in France, a market where it has a proven leadership position and clear growth prospects," the statement said.

In December U.S. activist investor Muddy Waters said that Casino was "dangerously leveraged" and Standard & Poor's in March cut Casino's credit rating to junk, notably citing weakness in Brazil.
Casino has rejected the Muddy Waters criticism, pledging to cut debt using proceeds from disposals, and promising improved profits and cash flow in its main French market.

Casino has been been selling assets in Asia and in Latin America to reduce its debt pile and has also made simplifying the group's complex structure a priority.
Under the plan unveiled on Thursday Casino said it would offer $5.50 per Cnova share, or a 61 percent premium from Wednesday's closing price of $3.40. That is well below the $7 a share Casino listed Cnova at on Nasdaq in November 2014.

When Casino floated Cnova, listing about 6 percent of its capital, it aimed to create an e-commerce business that could fund the expansion of direct sales and markets.
The business has underperformed, however, in the face of growing competition in Asia, France and a recession in Brazil.
In December, Cnova started an investigation into inventory mismanagement at warehouses in Brazil, which has weighed on its earnings due to writedowns.

"Creating a world e-commerce leader with these two national leaders in France and Brazil would have taken time and investments," said CM-CIC analyst Christian Devismes. (Reporting by Dominique Vidalon; Editing by Keith Weir)

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