Magazine Luiza Authorized to Buy ‘Estante Virtual’

RIO DE JANEIRO, BRAZIL – The Administrative Council for Economic Defense (CADE), Brazil’s antitrust agency, has authorized Magazine Luiza to purchase the ‘Estante Virtual’.

The decision, published on Friday, December 20th, in the Federal Gazette, finds that the deal will not lead to the dominance of companies in the book retail sector.

The ‘Estante Virtual’, a marketplace for new and used books, has been part of the Cultura Group, owner of ‘Livraria Cultura’ since 2017, which filed for judicial reorganization in October 2018. The amount paid by Magazine Luiza should be used to pay off part of its debt, estimated at R$285 million (US$71.3 million).

Most of this amount involves debts with banks and suppliers. The amounts of the agreement were not disclosed by the CADE, but in September of this year, the General Assembly of Creditors of Cultura Group approved the sale of the ‘Estante Virtual’ for R$44 million.

On that occasion, the Cultura Group stated that, due to the economic crisis in Brazil and its need to generate cash, it needed to sell its business units “which are not, at this moment, of strategic importance for the operation”.

The ‘Estante Virtual’ was founded in 2005 and has more than 5 million customers. In 2018, the company recorded the sale of 20 million books. According to the CADE, the website sale does not pose a monopoly risk, since Magazine Luiza will still have less than a ten percent share of the retail book market.

Another Magazine Luiza acquisition

In June, Magazine Luiza officially purchased Netshoes for US$115 million after a bidding contest with Centauro.

The competition between the two companies nearly doubled the final amount of the deal compared to what had already been agreed and approved by the CADE in April.

The purchasing power of Magazine Luiza is explained by its constant growth in recent months. In the third quarter, the company’s turnover grew 32 percent compared to the same period in 2018 and stood at R$4.9 billion. Net income grew 96.7 percent to R$235.1 million.