Advent to Take Majority Stake in Walmart Brazil

SAO PAULO, Brazil — Walmart Inc said on Monday that private equity firm Advent International will pick up an 80 percent stake in Walmart Brazil and the retailer will retain the remaining 20 percent, without disclosing the value of the transaction.

As a result of the deal, Walmart expects to record a non-cash net loss of approximately $4.5 billion as a special item in the second quarter.

The retailer has been reshaping its international business with a focus on investing in growth markets like China and India. It recently sold a majority stake in its UK arm ASDA to J Sainsbury Plc and paid $16 billion to pick up a majority stake in Indian e-commerce firm Flipkart.

Walmart had been looking for buyers for its Brazlian business. Reuters had reported in January that Walmart was shopping its Brazilian unit to private equity firms Advent and others.

In March, Reuters reported that, in the due diligence process, potential buyers had estimated that Walmart owes up to $3 billion in back taxes to state governments in Brazil, potentially adding to pressure for a discount sale.

Walmart entered Brazil in 1995 and had grown into the country's third-largest retailer following two major acquisitions in 2004 and 2005 and a period of rapid store expansion that came to a halt in 2013.

It currently operates 471 stores in Brazil, according to the company's local website. The retailer's Brazilian unit reported revenues of almost 30 billion reais ($9.4 billion) in 2016.

Walmart has posted operating losses in Brazil for seven years in a row after an aggressive, decade-long expansion left it with poor locations, inefficient operations, labor troubles and uncompetitive prices.

One of the people with knowledge of the deal said Walmart's operations in Brazil had not improved over the last two years, which coincided with the country's harshest recession in decades. The transaction is subject to regulatory approval, and the retailer expects it to close later this year.

A significant portion of the expected net loss will be due to foreign currency translation losses, and the final loss could fluctuate significantly due to changes in currency exchange rates up to the date of close, the retailer said.

By Nandita Bose and Gram Slattery; editor: Jonathan Oatis.