Acon Shelves Strong Return For Colombian Retailer

Latin America is infamous for its tough exit environment; an issue reflected by the fact that there are only a handful of private equity firms willing to invest in the region. Acon Investments is one of those firms, and recently, the Washington, D.C.-based buyout shop agreed to sell its holdings in Carulla Vivero SA, a Colombian retailer of food, clothing and other consumer products. A source close to the transaction told Buyouts that Acon was able to generate a 4x return on invested equity through the sale—a multiple that might signal that not all investments in Latin America are tough to unload.

Acon struck the deal, which values Carulla at more than $700 million (including debt) with Almacenes Exito SA, the largest retailer in Colombia. Exito will pay nearly 11x Carulla’s EBITDA to take control of the company.

“As a private equity investor, we continually have one eye toward monetization,” Acon Founding Partner Ken Brotman told Buyouts. “Ever since President [Álvaro] Uribe came to power (in 2002), Colombia has seen a resurgence, and that gave us the wind at our backs to start engaging prospective buyers for a sale.”

Credit Suisse and Inverlink were brought in to advise Carulla in the sale process, which attracted “several strategic parties,” according to Brotman. “We did get some unsolicited bids from financial buyers, but we knew from the beginning that this was going to be a strategic sale given the synergistic opportunities and revitalization of the marketplace.”

Acon originally acquired Carulla Vivero in two separate deals and had separate investment theses for each one. In 1998, the firm acquired a minority interest in Almacenes Vivero SA, a hypermarket chain with outlets in second-tier cities around Columbia’s coast that Brotman likened to a “Target with a grocery section.” In 1999, Acon acquired a control stake in Carulla y Cia SA, an urban supermarket chain in Colombia’s main cities.

“After about a year, we saw synergies in management, formats and operations, and, along with the founding family shareholders, decided to merge the two businesses in 2000 with the goal of developing multiple formats to best penetrate all the different customer bases in Columbia,” Brotman said.

Acon also introduced a loyalty card program and a credit program to help drive growth at the company.

Under Acon’s watch, Carulla’s sales increased from a combined $402 million in 1999 to more than $877 million last year. Meanwhile, EBITDA nearly tripled, going from $23 million to $65 million over the same period.

Today, Carulla is the second largest retailer in Colombia. Once combined with Exito, Carulla will be delisted from the Bolsa de Valores de Colombia and the RNVI, and the joint entity will generate about $2.4 billion in revenues from more than 260 retail outlets, ranging from supermarkets, supercenters, hypermarkets, warehouse clubs and convenience stores.

Carulla is an investment in Acon’s Newbridge Andean Partners LP, a fund that raised $160 million in 1996. The fund’s investment period ended in 2000. In addition to Carulla, the investment vehicle still has two companies in its portfolio; a liquefied petroleum gas distributor and a telecom provider. Brotman declined to discuss a timeline for future exits. —A.N.