Foreign funds based on Wall Street have put a spotlight on Almacenes Éxito for the large discounts it is offering on its listing on the Colombian Stock Exchange (BVC), Brazil and New York.
Why has Éxito become attractive? “For one thing, the price has dropped, and that always helps on the valuation front. The most important reason, however, is that ownership dynamics have changed dramatically here.”
The Success landscape has changed for the better
As they explain, at the time of the change of ownership, only 4% of Éxito’s shares were listed on the stock market and were only traded on the BVC, which is an illiquid stock exchange. Many business days, Éxito shares did not see a single share change hands on the Bogotá stock exchange.
However, having listings in Brazil and New York changed that calculus and EXTO shares began to sink after the turnaround. But the trajectory changed in October.
Grupo Calleja, a retail company based in El Salvador, swooped in with an offer to buy up to 100% of Éxito at $7.24 per ADR. Shares immediately rose to around $7 to reflect that offer.
And yet, Éxito is still trading today and well below that $7.24 offer. So what happened?
Specifically, Calleja offered to buy up to 100% of Éxito, but his offer came in the form of a tender that shareholders could accept or reject.
While the tender was very popular, not everyone accepted it. In fact, some people on social media suggested that there would be a higher offer: that $7.24 was inadequate.
However, when no higher bid was submitted, the bidding was completed and we were left with 14% of the company that remained publicly traded.
And how much is 14% Success worth on the open market? Shares have rapidly lost a third of their value since the tender offer closed, with shares falling from the presumed takeover value of $7.24 to around $5 today.
Grupo Éxito with better prospects
“Success is significantly more attractive now than it was last fall. On the one hand, the shareholder base has improved. In October 2023, there was a large float and many people were looking to sell, such as the recipients of the transfer in Brazil,” the funds say.
In contrast, today only a small part of the company is listed on the stock exchange. And people who still have the option to sell above $7 a share recently and chose not to. While the share price has fallen, its volume is incredibly light as the majority of the shares are now held by long-term holders.
Secondly, Calleja (the Salvadoran group) owning the vast majority of the company is a huge improvement over CBD or Casino.
“Calleja managed to repel Wal-Mart from Mexico, although Walmex has established a gigantic market share in countries like Guatemala and Costa Rica (not to mention Mexico), Walmex was not successful in the El Salvador market, which speaks of Calleja’s operational skills”, they add.
“Éxito has also invested heavily in its buildings and real estate. Éxito has spent the CAPEX to have competitive stores and shopping centers, and Calleja now takes control with a fleet of well-located retail stores that were poorly managed but still have good locations and modern, attractive infrastructure.”
Reports reaching Wall Street indicate that: “Éxito has a reported book value of $9.71 per share, indicating that the company is trading today at approximately half of book value”
Read more: Jaime Gilinski would buy Grupo Éxito due to excess liquidity.
