Jeronimo Martins watchful of acquisitions in existing and neighbouring countries
Jeronimo Martins (JM) [ELI:JMT], a listed Portuguese food retailer, is eager to expand further in Colombia and other regions, including through acquisitions, said Ana Luisa Virginia, chief corporate center officer.
In addition to recently entered Colombia, JM is monitoring other members of the Pacific Alliance (Chile, Peru and Mexico) for expansion opportunities, said Virginia, who spoke to this news service on the sidelines of its results conference.
It is also eyeing opportunities in countries that neighbour Poland, where it has a chain of hard discount supermarkets called Biedronka, she said. It is interested in analyzing proposals from advisers of opportunities in these regions.
Virginia noted that in terms of the countries where it already operates, it has anti-trust limitations in Portugal and Poland, while Colombia, where JM has been present since 2013 only, offers more expansion opportunities. JM expects to open 150 stores in the country this year, having ended 2016 with a total of 221 stores in the country.
Last year JM reportedly studied the auction of Profi Rom Food, a Romanian supermarket chain, which was eventually acquired by Mid Europa Partners in December in a EUR 533m deal. Virginia declined to comment on JM’s participation in this process.
According to one Lisbon-based analyst, a EUR 500m investment is relatively easy for JM. It would make more sense for JM to acquire a chain of supermarkets in a new country and smaller chains or individual stores where it operates, he said. Aside from Latin America and countries neighbouring Poland, JM was interested in entering Ukraine but pulled out because of the political unrest and chose Colombia instead, he said.
A second Lisbon-based analyst noted that JM has identified seven regions in Colombia where it wants to expand its supermarket network, which could include the acquisition of smaller, regional supermarket chains. These seven regions include the main cities of Bogota, Medellin, Pereira, Cali, Barranquilla, Cartagena and Bucaramanga.
In terms of new countries, countries near Poland make more sense than near Colombia, he said. Profi Rom Food in Romania was a natural expansion of JM’s Polish operations, he said.
JM has a conservative net debt to EBITDA ratio of between 0.3 to 0.35 and could comfortably increase this to 0.5 to raise EUR 400m to EUR 500m for an acquisition, he added. It would make sense for JM to eventually enter the western part of Ukraine, bordering Poland, he concluded.
Recent acquisitions include some individual stores of the Portuguese Alisuper supermarket chain in the Algarve it bought in 2015. Last year Rothschild advised JM on the sale of Monterroio – Industry & Investments B.V., its Netherlands-based food distribution company, to Sociedade Francisco Manuel Dos Santos, the holding company of the family which controls JM.
At the company’s 2016 results conference JM announced a EUR 700m investment for 2017, though Virginia explained that any potential M&A is not included in this amount. A large portion of the EUR 700m capex will be spent on logistics – for building three new distribution centers in Colombia, one in Poland and one in Portugal.
The sale of Monterroio for EUR 310m helped JM post EUR 593m in profit in 2016. If the Moterroio deal is excluded, JM’s profit would be EUR 361m.
JM’s EBITDA in 2016 came to EUR 862m on sales of EUR 14.62bn. Because of its strong results, JM decided to propose a dividend payment of EUR 380.2m, corresponding to EUR 0.605 per share.