Merger of retailers reduces impact of recession

Sao Paulo-the possible merger of Restoque and Inbrands, announced on the day 2:00 pm fact relevant to the Brazilian Securities Commission (CVM), comes at a time when both have shown negative results. The two groups had prejudice and drop in sales in the first quarter and the strategy would be a way to survive.
To Guide Investment Analyst, Rafael Ohmachi, signaling is positive and should ensure significant synergy gains. "I believe the company that came from this marriage would be much better positioned for an upturn. She could '' surf '' best in this scenario, "he says.
In the document, submitted jointly by the two companies, cost reduction is cited as justification for the Union. "The combination is expected to bring a number of synergy gains, both in the efficiency of the supply chain as in the management of commercial, General and administrative expenses", reported the announcement.
In 2014 the two companies were close to announcing a merger, but failed to strike a deal. At the time the Restoque just combining the operation with the Dudalina. "The indications are favorable that the merger should occur this time," says Ohmachi. "The two companies go through difficulties, by a crisis more acute. This brings a greater urgency. "
In the first quarter of this year the Restoque has made a net loss of 24.2 million R$, and a drop in net revenue of 16%. On Inbrands, the net loss was even greater, from $ 29 million. Already the net revenue of 5.5% retraction.
According to the Communique, the due diligence process, which will make a scan of the accounts and assets of the companies, will start immediately. And, if in fact such negotiation, the companies the ability to raise funds through a public offering.
Market perception
The analyst says that the movement of merger and acquisition, which has been sense-with the recent announcement of Kroton''s interest in joining Statius-is very well regarded by the market, since it signals that entrepreneurs see a resumption.
"We say that there are two merger and acquisition moves. One in which the market hits rock bottom, and entrepreneurs are beginning to see a resumption, and one that marks the top of the market, and generally indicates a fall, "says Ohmachi. The current conjuncture would fit in the first movement and demonstrates the interest of the companies to be better positioned for a possible resumption.