After the failure of their merger with Falabella, D&S would arrive at Peru

Last Monday, D&S, leader in supermarkets in Chile, and the Falabella group announced the decision to cancel their merger in Chile, after the refusal of the authorities that argued abuse of dominion position.

This alliance was an opportunity so that D&S could arrive to Andean countries, where Falabella already has a strong presence. The Ibanez family (owners of D&S) has no retail business outside Chile and Argentina.

The arrival to the region of giants like Wal-Mart, Carrefour and Casino is expected soon and the Chileans have not remained of crossed hands. Already Ripley, Falabella and Cencosud have arrived and extended their operations in Mexico, Peru, Colombia and Brazil. Will be decided the Ibanez to follow the steps to them? Let us see.

Last July, during the forum "Internationalization of the Chilean retail", held in Santiago, we asked Alfredo Moreno, director of Falabella, and to Silvio Rostagno, corporative manager of D&S, what the regional operators would have to do to restrain the attack of the world-wide giants of the retail. They agreed in answering: To grow internationally. The one that arrives first gets market share and better locations. As well, D&S spokesmen have indicated its interest in Peru as part of its internationalization, by three arguments: proximity, its political-economic stability and, above, its good growth prospects.

In that sense, and after the decision taken this week, it is clear that D&S already must determine to grow outside, specifically in Peru, with two feasible alternatives today: to ally with Falabella or to make it alone.

In the first case, he could carry out here the merger denied in Chile. Their agreement would give Tottus more financial muscle to face a heavy weight supermarket like Cencosud (that will harness to the Group of Supermarkets Wong with more of US$100 million this year). D&S would face a practically virgin market (the penetration of the modern retail in Peru does not arrive at 28%) and with a spending power every greater time. Revamp Tottus? Launch new formats? Acquire small chains? Everything fits within the plans of this duet.

In the case of not reaching an agreement with Falabella to merge in Peru, would dare the Ibanez to enter Peru alone? Yes, for the reasons explained above. It will be more difficult, sure because the best locations already were taken by Peruvian Wong, Supermercados Peruanos (SP) and Falabella. In addition, SP already said that it will not sell. Although Wong said the same months ago, the fact of being part of a solid group as Interbank gives an endorsement them like believing to them. That is the possibility of acquiring to another great company of he himself heading is not very realistic at the moment. The ideal vehicle to enter an international market like Peru would be with a minority local partner, but Enrique Ostale, general manager of D&S, would not hesitate to enter without a partner if that is the case.

Whatever outside the decision that takes the Ibanez, the certain thing is that they do not face any capital shortage. D&S today has an investment of accounts receivable in their financial business, on the US$700 million, which can be used to obtain financing. The other source is to sell some properties, indicated Ostale recently. The Peruvian market bond as much effort? Chile is already developed and Peru has a huge potential. When will come? The maximum date drawn up by the company is 2010.

Publication: El Comercio
Provider: El Comercio
Date: March 5, 2008

This translation has been prepared using machine translation software, which has been enhanced with a specialized dictionary.

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