A Colombian consolidation story

In Colombia, the 4x return of ACON Investments-backed Carulla Vivero shows that while opportunities in the Latin American markets can take time to show their true potential, there are rewards to be reaped from being patient. By Judy Kuan.

Eight years is quite a long time to be in any relationship, much less one with a portfolio company in the private equity sphere. However, such long holding periods have been observed more often than not within the context of Latin America’s private equity market, with some results less desirable than others.

Some private equity firms in the region have taken advantage of the long growing season and have been fortunate enough – and patient enough – to see positive results. One example is ACON Investments, the Washington DC-based affiliate of Texas Pacific Group and manager of the $160 million Newbridge Andean Partners LP fund targeting Colombia, Venezuela, Argentina, Brazil and Chile.


Carulla Vivero: strong returns for ACON

ACON has helped drive the consolidation of the retail industry in Colombia through its backing of Carulla Vivero, with whom the firm’s relationship may finally be winding down to a close. As reported earlier this week by Reuters, Almacenes Éxito – Colombia’s largest retailer – is planning to buy up to 77.5 percent of Carulla’s outstanding shares at a price that would value the company at around $546 million. A source familiar with the transaction has told PEO that ACON will be selling its entire 35 percent interest in the company, earning the firm a solid four times its investment.

The story of Carulla Vivero began in 1998 when ACON acquired a minority stake in Almacenes Vivero, a regional chain of six retail “supercenters”, from the local Azout family. In 1999, ACON – alongside local investors – further invested in the sector by acquiring a majority stake in Carulla y Cia., the longstanding leading supermarkets chain in Colombia’s capital Bogotá.

Building upon synergies, ACON then facilitated the merger of the two supermarket chains to form Carulla Vivero. Upon the merger in 2000, Sam Azout of the Azout family became chief executive of what is now Colombia’s second largest supermarket chain at the tender age of 34, while ACON founding partner Ken Brotman and partner José Miguel Knoell joined and still sit on Carulla Vivero’s board of advisors. New management was also brought on post-merger.

The scale and profit performance of the company allowed it to issue debt in the Colombian public markets in 2001 – making it one of the first Colombian private sector companies to do so. In 2004, Carulla acquired Surtimax, a local chain of 20 establishments that focus on low-income consumers in Colombia’s larger cities. Carulla Vivero now has over 160 stores in Colombia.

Until the recent news of Éxito’s planned acquisition of Carulla Vivero, the two supermarket chains had been direct competitors, along with French retailer Carrefour – which also recently expressed interest in taking on a piece of Carulla according to reports. The Éxito-Carulla merger is a latest chapter in the consolidation of Colombia’s supermarket sector.

However, the Carulla story is not the end of ACON’s interest in opportunities within Latin America’s retail sector. After all, last year ACON made another bet on the region’s supermarket space, this time acquiring Koninklijke Ahold’s GBarbosa Comercial, the seventh largest supermarket retailer in Brazil. ACON’s plans for the Brazilian retail market still remain to be seen. However, given ACON’s activities in Colombia over the past few years, it is probably not too much of stretch to say that change is in the air for Brazil as well.