PARIS — Paris, France-based Rexel announced today the sale of its operations in Latin America to Paris-based fellow electrical distributor Sonepar for an enterprise value of $51 million.
This divestment is part of Rexel's previously-announced disposal plan in order to reallocate its resources to its most profitable activities. The main terms and financial impacts of the disposal plan were announced at the presentation of the 2014 full-year results on Feb. 12.
Rexel currently operates in 3 countries in Latin America: Brazil, Chile and Peru.
Combined, these three countries' contribution to Rexel's 2014 consolidated sales amounted to $287 million (down 3.8 percent year-on-year on a constant and actual-day basis), representing about 2 percent of consolidated Group sales. Their contribution to Rexel's 2014 adjusted consolidated EBITA was a loss of $3.7 million (vs. a profit of $0.9 million in 2013).
With regards to Brazil, which represents almost 60 percent of Rexel's operations in Latin America on the basis of its 2014 consolidated sales, Rexel estimates that its value-creation prospects are no longer in line with its initial investment criteria and growth expectations, and do not justify maintaining its presence in the country.
Chile and Peru, which form the rest of Rexel's business in Latin America and whose combined sales amount to around 100 million euros, are markets whose size remains relatively small and limited in scope. Therefore, Rexel decided to sell its operations in Chile and Peru, simultaneously with the Brazil divestment, and discontinue its operations across Latin America.
The divestment of all of its operations in Latin America will allow Rexel to refocus its managerial efforts on its three main geographies (Europe, North America and Asia-Pacific) and continue its targeted acquisition policy in these regions.
As a reminder, based on full-year 2014 consolidated accounts, the disposal plan announced on Feb. 12, once fully completed, should have the following financial impacts:
- A reduction of around 5 percent in the Group's consolidated sales,
- A positive contribution of c. 20bps to the Group's adjusted EBITA margin,
- A moderate increase in the Group's free cash flow before interest and tax.
Based on full-year 2014 consolidated accounts, the divestment of Latin America would have the following financial impacts:
- A reduction of 2 percent in the Group's consolidated sales,
- A positive contribution of 8bps to the Group's adjusted EBITA margin,
- A slight increase in the Group's free cash flow before interest and tax.
The divestment of Latin America thus represents about 40 percent of the whole disposal plan, which should be completed by the end of 2016.
This transaction should result in an estimated loss of about $78 million, before tax.
The transaction remains subject to approval by the relevant anti-trust authorities.
