Cencosud Acquires Carrefour Colombia Pedro Fernandez Ignacio Guarda Marisol Martinez Paula Pontiliano Heng Zhang

Carrefour Colombia: An Opportunity Arises Main character: Juan Manuel Parada , the newly appointed CFO of Cencosud Carrefour, the world’s second-largest retailer, looking to cut costs and debt, due to the difficult economic situation in Europe. Carrefour was contemplating whether to sell its Colombian operations (100 stores). Juan Manuel worried that disclosing this information could lead Horst Paulmann, President of Cencosud, to make a hasty decision. This could be Juan Manuel’s first acquisition and he didn’t want it to be a value-destroying one. Needs time, to put together a valuation but knew he didn’t have much. Since he had this report, it meant that other competitors also did. He needed to reach a conclusion fast or risk Wal-Mart beating them to the punch. Advantages Disadvantages Allows them to penetrate the market in a way that wouldn’t have been possible via organic growth Carrefour stores share similar format to Cencosud stores, which makes them a good fit with Cencosud’s current operations Carrefour’s Colombian operations represent a large asset that would require Cencosud to undertake more debt than usual How Should CFO Juan Manuel Parada present the opportunity to President Horst Paulmann and how much should he value the company for?

Chilean Retailers Overview by 2011 Company Supermarkets Department Stores Home Improvement Sales 2011 (in $ million) EBITDA 2011 Market Cap. 2011 Total Square Feet 2011 Latam Footprint 2011 Other brands in Latam markets $15,749 $1,436 $13,107 27.6 million Chile, Argentina, Peru, Brazil, Colombia $10,633 $1,591 $18,710 18.9 million Chile, Peru, Argentina, Colombia NA $5,394 $531 $3,172 7.5 million Chile $2,474 $221 $1,845 3.9 million Chile, Peru $344 N.M. $278 2.0 million Chile, Colombia $471 $46 $235 0.9 million Source: Company reports, Bloomberg.

Food Retail in Main Latam Markets Colombia Highest growth prospects in the region. Solid economic environment Main Players Grupo Exito, Carrefour, Olimpica, La 14 Brazil World’s third largest groceries market, having both strong local and foreign competitors Main Players Pao de Azucar, Carrefour, Walmart Peru Low penetration of “Developed” retail. Attractive growth driven by increase in real wages Main Players Supermercados Peruanos, Tottus Argentina Industry affected by political instability, and economic difficulties (inflation, access to credit). Nevertheless, dominated by foreign players Main Players Carrefour, Cencosud and Walmart Chile Highly competitive market, strong local players plus Walmart Main Players Walmart, Cencosud, SMU, Tottus Source: Cencosud Annual Report 2011

Company Overview: Cencosud More than 50 years of history in retail (beginning 1960) Operations in 5 countries: Chile, Argentina, Peru, Brazil and Colombia Follows a multi-format strategy Over 800 stores, 25 shopping centers, 4.2 million credit cards issued Strong financial performance: US $15.7 billion in revenues and an EBITDA of US $1.4 billion that has increased by more than 3x since 2005 + 10 acquisitions in Brazil, Peru, Chile and Argentina Offers more than 450 thousand products through diversified business segments and 15 brand names Source: Cencosud 2011 Annual Report.  

Organic growth plus a sequence of key acquisitions positioned Cencosud as a retail powerhouse in Latin America 1982 – 2001 Organic Growth in Argentina 2002 – 2006 Acquisitions in Argentina 2007 – 2011 Expansion to Colombia, Peru and Brazil Looking ahead: Growth in current markets vs. New markets 1982: Opened its first Jumbo supermarket (+10 stores by 2001) 1988: Opened its first commercial center, Unicenter, (by 2011 +10 commercial centers and 40% of the market share) 2002: Acquired 4 Home Depot stores for $90 million 2004: Acquired the supermarket chain Disco for $60 million, which owned 19.2% of the market share 2007: Joint Venture with French retailer Casino, to open 4 stores of Easy Colombia 2007: Acquired Grupo Wong in Peru for $500 million (2 commercial centers and 74 supermarkets) 2008: Acquisition campaign in Brazil for $2 billion (7 acquisitions resulted in over 150 new supermarkets) Low penetration in Colombia, Peru and Brazil requires Cencosud to further invest in these markets Mexico and Panama are featured as potential destinations to continue geographic diversification in the region Cencosud is still debating whether to continue its aggressive diversification strategy or consolidate its market position in Brazil, Colombia and Peru.

Looking Forward: Linking roads Continue developing a multi-format and multi-brand strategy Focus on operating margins and cash flows The Company declares no intentions to acquire assets in Colombia by Jun-12 Organic expansion in selective markets Continue to pursue opportunistic acquisitions while maximizing synergies Enhance customer loyalty The company’s business strategy resides in leveraging the competitive advantages of all business lines to provide consumers with exceptional shopping experiences Source: Cencosud

The opportunity: Carrefour Colombia 2nd largest player in the Colombian market after Grupo Exito (controlled by the also French company Casino) 72 Hypermarkets, 4 Cash & Carry and 16 convenience stores ~400 th square meters of floor space Owns 90% of the real estate Sales and EBITDA of over $2bn and $140mm in 2011

Valuation 31% premium paid

The Aftermath The company’s Chairman Horst Paulmann flew to Paris to demonstrate great interest in the asset and the transaction was sharply executed Cencosud announced on October 19th, 2012 that it was acquiring Carrefour Colombia for €2 billion (approximately $2.6 billion), the transaction included the real estate The transaction was financed through $1 billion in bonds and $1.5 billion equity issue The price paid included a 31% premium according to our valuation Stock price of Cencosud dropped dramatically after the announcement and has never reached CLP$ -12% drop Announcement date Source: Santiago Stock Exchange