Sonae Sierra and Aliansce merge in Brazil

Last Thursday night, Sonae Sierra Brazil and Aliansce reached a merger agreement that will ” create the largest mall operator in Brazil”, through the combination of “two complementary portfolios”, representing a total of 40 shopping centres.

Accordingly, Sonae Sierra Brazil’s current shareholders will retain 32.1% of a joint entity created as a result of the merger. The deal will be finalised when Aliansce shareholders receive their 67.9% of the joint entity.

“The merger reflects Sonae Sierra Brazil’s long-term strategy to strengthen both our competitiveness and growth potential in the Brazilian market”, Luís Mota Duarte, Sonae Sierra’s CFO, has answered to ECO, while explaining this operation will also provide extra flexibility for the company’s expansion plans in South America.

Such operation “is coherent with Sonae Sierra’s growth and diversification philosophy, which includes the creation of value-adding partnerships with international blue-chip partners” therefore increasing competitive leverage, the CFO added.

The Merger: the rationale, the synergies and the costs

As per the agreement, this operation requires the stamp of approval of the Brazilian Markets and Competition Authority (CADE), as well as the blessing of both companies’ shareholders. Sonae Sierra Brazil and Aliansce are expecting to combinate businesses to strengthen their position in that market, stressing the relevance of this business opportunity. “A strong strategic rationale” was taken into account because of “both businesses’ high complementarity”, potentiating synergies and improving efficiency, as mentioned in a joint statement when announcing the merger.

Yearly synergies are expected to be between 12.6M€ and 16M€ (or about 55M to 70M Brazilian Reais), despite both companies admitting there will be costs attached to it.

Aliansce foresees that the merger will cost 6.2M€, while the cost projection for Sonae Sierra Brazil is 7.4M€. These costs are assessment and bureaucratic expenses-related.

If the agreement fails to be approved, the party responsible for the failure is obliged to pay a 46M€ compensation to the other party.

Sierra’s Sale option and Aliansce’s leadership

“The option of selling the totality of its participation” until 36 months after the completion of the merger is foreseen, also having the option of incorporating minor participation in Parque D. Pedro – one of the most valuable assets – in exchange for new shares.

The merger agreement has also defined the composition of the new company’s board. Rafael Sales Guimarães, Aliansce’s CEO, will be directing a team of 8 people, whereas Carlos Alberto Correa, Sonae Sierra Brazil’s CFO, will continue to lead the Finance department. “Sonae Sierra Brazil’s team will perform a key role in the growth, integration and management of the future company”, Luís Mota Duarte assured.