French retailer Carrefour is to sell its Colombian operations to Chile-based Cencosud for E2bn (£1.63bn), including debt, by the end of the year.

The French retailer will pull out of Colombia by the end of the year

In 2011, Carrefour Colombia posted net sales reaching E1.5bn (£1.22bn), excluding petrol.

Carrefour operates 72 hypermarkets, 16 convenience stores and four cash and carries in the country.

Casino’s subsidiary Éxito dominates the Colombian market and Carrefour, since entering the market in 1998, operates as part of a joint venture with Grupo Empresarial Bavaria. Carrefour is the second largest retailer and has missed out on significant takeovers in the past.

Colombia is Carrefour’s smallest operation in Latin America, representing only 2% of the group’s total worldwide revenues. 

Carrefour’s exit from Colombia is in line with its new strategy of focusing on geographies and countries in which it holds or aims to develop a leading position. The retailer has already withdrawn from Greece and Singapore since Georges Plassat became chief executive and more countries might face the axe.

Cencosud already operates its Easy DIY banner in Colombia, following an agreement reached with Casino to form a 70:30 joint venture to launch the fascia in the Andean country. At present, Cencosud holds 100% of its Colombian subsidiary.

With Carrefour banners added to its portfolio, Cencosud aims for a multi-format approach that will enable it to take full advantage of the growing retail market in Colombia and open up further growth opportunities throughout Latin America.

Cencosud president Horst Paulmann said: “Not only are we acquiring a great operation, but we’re also entering an extraordinary market, which wouldn’t have been possible via organic growth.”

Opportunities for expansion are increasingly scarce in Chile and, as a result, Cencosud has pursued an aggressive acquisition strategy.

The retailer aims to replicate that business model abroad.

In 2011 alone, the retailer took over supermarket operator Prezunic in Brazil, while in Chile it acquired department store group Johnson’s.

The traditional sector continues to dominate the retail market in Colombia and exchange rate issues could hamper growth.

Post-acquisition, Cencosud also needs to prepare for the market entry of retailers such as Walmart and Jerónimo Martins, which could dramatically change the competitive environment.

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