Atacadão’s management has proposed to sell the company to its largest investor, Carrefour, subject to free float approval. Minority shareholders don’t have much to base their vote decision on – but the information that has been disclosed may raise more questions than it answers.
With thousands of companies holding shareholder meetings during proxy season, it’s hard to know where to start. Glass Lewis’ Controversy Alert service can help, identifying the most crucial meetings globally and allowing investors to make better informed voting decisions with the latest information in hand.
In this post, we provide a roundup of the meetings taking place this week that were previously highlighted by Controversy Alerts, and look deeper into the situation at Atacadão. To get alerted ahead of time, get in touch and sign up for Glass Lewis’ Controversy Alert service.
Controversy Alerts April 7 — April 11, 2025
April 7 Atacadão SA; Controversy Alert issued March 26
April 10 The Toronto-Dominion Bank; issued March 28
April 10 UBS Group AG; issued March 25
Deep Dive: Atacadão SA
You’ll have to forgive Atacadão investors if they’re a bit confused. Despite the company’s shares reaching an all-time low in January, the company’s two most recent earnings calls have exuded good vibes – adjusted net income up 6x from 2023, expenses down, increased EBITDA and sales growth, and management proud at having “executed exactly what we had planned”.
But the discrepancy between the share price and underlying performance isn’t the confusing part.
Just a week before the latest earnings call, which covered 4Q24, the company announced that it was seeking shareholder approval of a transaction through which Carrefour S.A., the owner of approximately 67.4% of the issued share capital, will acquire full control. Consistent with common market practice in Brazil, minority investors don’t have much to go on in assessing the transaction. But while there hasn’t been much information disclosed, there are plenty of red flags.
While the proposed consideration represents a notional premium to recent pre-announcement trading prices, this perspective hinges on a one-month VWAP -- and Atacadão's stock was trading close to its all-time low when merger discussions were initiated. Moreover, those negotiations and related due diligence were completed in just over three weeks, and the process was overseen by a three-member committee that included a conflicted director who also serves on Carrefour’s board and was not considered independent in relation to her service on the special committee.
Atacadão argues the arrangement is favorable to its shareholders because it: (i) offers a premium to market prices and relative trading values over the month prior to execution; (ii) provides the option to roll up to a substantive position in Carrefour, while also maintaining indirect exposure to Atacadão; and (iii) frees management to focus on core operations and contribute to the broader group's strategy of delivering superior shareholder returns.
Several Atacadão investors have characterized the deal as undervalued or opportunistic. Whether those concerns are sufficient to block the advances of the company’s only practicable suitor remains to be seen. Regardless, investors may be pondering just what management meant on that Q4 call when they claimed to have “executed exactly what we had planned”.
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