Busy Advent Acquires Retailer, Airport Manager

Advent International this month closed on the back-to-back acquisitions of a Brazil-based home-improvement retailer called Quero-Quero and the manager of Dominican Republic-based airports known as Aerodom.

The two acquisitions, neither of which involved auctions, join a host of other moves from the firm, including the closing of a Japan-focused fund and the merger of two portfolio companies (see accompanying chart for more coverage).

With home construction booming in Brazil, Advent made an all-equity acquisition of Quero-Quero, a retailer of home building materials, home furnishings and accessories with 170 locations in the southern part of the country. The company also has its own credit card company geared toward low income earners. Quero-Quero has grown more than 25 percent every year for the past five years, and expects to generate revenue of $450 million this year, said Advent Principal Luiz Antonio Alves.

“The guy who decides to start building a house can find credit in Quero-Quero to build his first home, and then also decorate and buy the appliances, and so on,” Alves said. “There is a significant pent up demand in the [Brazilian] housing market, and an affluent middle class that has seen an increasing income recently.”

On top of the 170 retail locations Quero-Quero operates, Advent hopes to open another 200 stores within the next four years. The firm also intends to pursue a roll-up strategy by acquiring smaller local players in Brazil’s fragmented home improvement market, where the top three retailers only account for 5 percent of the country’s building materials sales, Alves noted. While the acquisition was 100 percent equity-based, Quero-Quero did secure a long-term debt facility from Brazil’s Unibanco to support Advent’s aggressive growth plan for the company.

The all-equity deal was funded primarily through Advent’s Latin America-focused fund LAPEF IV, which closed on $1.3 billion in 2007. The firm also tapped equity from its previous Latin America fund, the $375 million, vintage-2005 LAPEF III as well as its $10.4 billion global fund GPE VI, which closed earlier this year.

The six airports that Aerodom (short for Aeropuertos Dominicanos Siglo XXI SA) controls served more than 4 million people last year, giving Advent control of about half of all airport market share in the Dominican Republic, according to Luis Solórzano, a principal at Advent.

Specific terms of the transaction, which included a two-tranche debt package provided by the Bank of Nova Scotia and ING Group, were not disclosed. The deal was sourced on an exclusive basis through a preexisting relationship with Aerodom’s primary owners, the Hazoury family, Solórzano said.

According to Solórzano, running an airport is like running any other business: First, identify the means of increasing revenue, then execute on the strategy. Airports are typically divided into two sections: aeronautical and commercial. On the aeronautical side, Advent intends to make infrastructure investments, such as in the construction of warehouses, to expand Aerodom’s exposure to cargo services and private aviation.

Commercially, Advent would like to increase the amount of retail space available in Aerodom’s airports for duty-free retail, food and beverage providers. The firm also plans to support the building of new parking facilities and to expand Aerodom’s advertising revenues, Solórzano said.

The buyout of Aerodom marks Advent’s thirteenth in the airport sector, and will likely not be its last. “We are proactively looking for other opportunities in Latin America and see this as an opportunity [to] create a Latin American/Caribbean airport platform,” Solórzano said.

In addition to Aerodom, Advent also owns the commercial operator of Mexico City International Airport, Inmobiliaria Fumisa, as well as airport-related retailers such as the Mexican airport restaurant and bar operator Aerocomidas and Brazilian restaurant concessions company Grupo RA.

Aerodom and some of Advent’s other Latin-American airport-related investments will be rolled into an umbrella company called Latin America Airport Holdings sporting an enterprise value of more than $1 billion.