Carrefour offers 20% premium to take Brazil unit private

By Andre Romani and Geert De Clercq

SAO PAULO/PARIS (Reuters) -French grocer Carrefour SA on Tuesday proposed to take private its Brazilian unit Atacadao SA, also known as Carrefour Brasil, offering 5.3 billion reais ($920 million) in cash or shares for the one-third stake it does not already own.

The unit operates Carrefour supermarkets and wholesale stores under the Atacadao and Sam's Club brands, contributing about 20% of the group's global gross sales.

"Delisting the company will allow it to manage operations with more agility and enhanced focus on execution," Carrefour said in a statement.

Under the proposal sent to Carrefour Brasil's management, the French parent company offered to pay 7.70 reais ($1.34) per share of the Brazilian unit, an almost 20% premium over Monday's closing price. Minority shareholders would be entitled to payment in listed shares of Carrefour, cash or both.

The deal could be worth some 5.3 billion reais at that price.

Shares in Carrefour Brasil rose around 10% on Tuesday.

Carrefour owns about 67% of the Brazilian unit, controlling the company together with Peninsula Participacoes, the holding company founded by the late Abilio Diniz.

Peninsula supports the deal and has decided to select the alternative to convert all its Carrefour Brasil stake into Carrefour shares, according to the Carrefour statement.

Peninsula, also one of the largest shareholders of France's Carrefour, directly holds about 7% of Carrefour Brasil.

Santander analysts including Ruben Couto said they believe the offer undervalues Carrefour Brasil but that minority shareholders' ability to block the deal are limited since Peninsula is aligned with Carrefour.

"We see limited space for the deal not progressing, though the valuation could potentially be adjusted for Carrefour France to fully take Carrefour Brasil private," they wrote in a note to clients.

The deal, which is pending approval from Carrefour Brasil's shareholders, is expected to be finalized in the second quarter, and would increase its earnings per share from the first year, Carrefour added.

"We are convinced that this decision represents an excellent opportunity for the group's capital allocation and will generate sustainable value for our customers, employees, partners and shareholders," Carrefour's Chief Executive Alexandre Bompard said in a statement.

Instead of cash, Carrefour Brasil shareholders could also choose to receive one Carrefour share for every 11 shares of the Brazilian unit. The offer also included an option for compensation in both cash and shares.

($1 = 5.7651 reais)

(Reporting by Andre Romani in Sao Paulo and GV De Clercq in Paris; Editing by Brad Haynes, Chris Reese, Aida Pelaez-Fernandez and Richard Chang)