Read this Thursday’s edition of the FolhaMercado newsletter (17) – 08/17/2023 – Market

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From straight skewers to BRL 5.4 billion ‘steak house’

The private equity fund Bain Capital will buy the Brazilian company Fogo de Chão from manager Rhône Capital, in a deal that valued the chain of steakhouses in $1.1 billion (R$ 5.4 billion), according to the Reuters agency.

In numbers: the Rhône had disbursed $560 million (BRL 1.8 billion at the time) in 2018 to remove Fogo de Chão from the Nasdaq, the American stock exchange on which it had been listed since 2015.

• The sale of the assets of the Brazilian steakhouse to Bain Capital generated a return in dollars for Rhône of more than three times, according to Reuters.

To the point: since 2021, when the restaurants reopened to the public after the pandemic, Fogo de Chão’s revenue has grown by 15% a year.

The good result even made Rhône think about listing the asset on the Stock Exchange, but the still somewhat sour market conditions made the manager opt for the private sale.

Who is who:

• Ground fire: Founded in 1979 in the gaucho skewer tradition, today the steakhouse is more closely associated with the Brazilian Steak House. Of the 76 units around the world, 58 are in the USA, the country where the company arrived in 1997. In Brazil, there are eight restaurants.

• Bain Capital: with $175 billion under management, the fund knows the food industry. It has already invested in brands such as Burger King, Dunkin’ Brands, Domino’s and Bloomin’ Brands.

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Merger in the book market

The Dois Pontos bookstore and the TAG subscription club announced this Wednesday the merger of their operations, creating a new company with revenue estimated at BRL 38 millionshows the blog Panel das Letras.

Who is who:

• Two points: founded two years ago, the virtual-only bookstore now has a catalog of 150 thousand titles.

• TAG: the subscription club launched in 2014 is based on a business model of curating books, which are delivered at home. It has about 35 thousand subscribers.

The strategy: in addition to sharing an investor partner (Alfredo Setubal), the companies say that their businesses complement each other.

• Dois Pontos even invested in a couple of subscription clubs, but which did not reach a relevant level.

• TAG also opened a store to sell its editions, but today it has difficulties with the increase in costs generated by the pandemic.

The bet of the two is on valuing the curatorship and the loyalty of readers in a moment of crisis in physical stores, symbolized by the legal back and forth of the bankruptcy process of Livraria Cultura.

Last year, virtual bookstores recorded higher sales than physical stores in book sales for the first time in the country’s history.

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Another negative tri for retail

Most of the ten Brazilian retail companies that earn over R$ 1 billion ended another quarter in the negative.

• Of this group, seven (Carrefour, Assaí, Magalu, Via, Raia Drogasil, Natura&Co and Grupo Pão de Açúcar) had losses.

• Two did not report results for the period. In judicial recovery, Americanas postponed the disclosure of the balance sheet, while Grupo Boticário is a privately held company.

• The only one to end the quarter in the black was Grupo Mateus, owner of wholesale stores and supermarkets with a strong presence in the Northeast, which recorded a profit of BRL 294 millionup 13% year-on-year.

Which explains: the sourness in the sector does not surprise analysts, who already predicted difficulties with the high level of the Selic. The segment is more penalized by interest because it suffers at both ends:

• The retailers are very dependent on credit to operate. With Selic high, new loans become more expensive, as well as debt management assumed in previous years.

• With fewer discounts and installment conditions, consumers they put their foot on the brakes on purchases to avoid further indebtedness.

More about companies and Scholarships:

↳ Manager Michael Burry, who became famous in the movie “The Big Short” for having predicted the American crisis of 2008, bought short positions against the S&P 500 and Nasdaq indices. The strategy means a bet on the fall of American stocks.

↳ The Vietnamese manufacturer of electric cars Vinfast (whose story we tell here) debuted on Tuesday on Nasdaq and already has a market value greater than automakers like GM and Ford. The company only started to focus on gasoline-free models last year.

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The source of the blackout has been discovered, but…

The origin of the problem that caused a blackout on Tuesday in 25 states and in the Federal District was a line operated by Chesf, a subsidiary of Eletrobras in the Northeast region. The information was reported by Minister Alexandre Silveira (Mines and Energy).

Understand: according to the government, a programming error caused a protection not to be activated when it was necessary and then the line “opened” (stopped receiving energy).

• The general director of the ONS (National System Operator) also stated that there was no additional problem, as suggested by the minister on the day of the blackout.

Yes but… Both the government and Eletrobras say that the fault that caused the shutdown of a transmission line is not enough to cause a systemic problem like the one observed.

• “The isolated shutdown would not cause the impact seen on the SIN [Sistema Interligado Nacional] and this is a point that is still being investigated”, said the ONS.

• Alexandre Silveira stated that, for this reason, it is still necessary to work with all the hypotheses, and continued the investigations with the PF.