Brazil's Antitrust Watchdog Greenlights Soma-Arezzo Merger

Brazil's Antitrust Watchdog Greenlights Soma-Arezzo Merger
Photo: Arezzo 29.03.2024 201

Deal was approved in a summary procedure as it poses no harm to competition.

The General Superintendence of the antitrust watchdog Cade approved the Arezzo and Grupo Soma merger. The deal was approved in a summary procedure, an analysis in which the antitrust regulator considers a case has the least offensive potential to competition, due to the simplicity of the operation.

If the Cade tribunal does not highlight the merger for analysis or there is no appeal filed by any interested third parties within 15 days, the decisions of the General Superintendence will be final and the operations will receive final approval.

“The applicants’ reduced market shares in the markets identified above allow us to infer that the operation does not result in a significant increase in the portfolio to the point of causing damage to the competitive environment,” the Superintendence wrote in an opinion.

In the analysis, the superintendence informs that the market-share estimates of companies in horizontally overlapping markets (of the same segment) are below 20% and that market-share estimates in vertically integrated markets (in a chain) are below 30%. Therefore, the operation is not expected to cause harm to the competitive environment.

The deal includes a non-compete clause. It prevents the “Birman block” and primary shareholders Grupo Soma from engaging in any way as consultants, partners, or investors in any activities in the retail, wholesale, and industrialization and manufacture of clothing, articles of clothing, and other activities competing with the group. They are also barred from establishing any type of commercial relationship with the customers of the resulting company, aiming to provide direct or indirect services that are, in any way, related to competing activities.

The commitment covers the entire period up to two years after ceasing to be a shareholder of the resulting company, or for five years from the execution of the shareholders’ agreement, whichever occurs last, unless with specific authorization and in writing from the board of directors of the resulting company.

The deal creates an operation with 34 brands, 2,000 stores, and 21,000 sales channels. The two companies tried to combine their businesses for at least two years. The deal is the biggest in the retail segment since the Raia-Drogasil merger in 2011.

When the merger was announced, the market expected the new company to be placed among the top 20 in the sector in Brazil, becoming the second-largest fashion retailer by annual revenue, second only to Renner. The company emerges with R$11.8 billion in net revenue projected for 2024.

Source: Valor International


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