Shares in Brazil's Magazine Luiza soar after it buys Netshoes

Brazilian retailer Magazine Luiza’s shares hit their highest even level of 187.75 reais in trading on São Paulo's BM3 stock market early on Tuesday afternoon.

On Monday, Magazine Luiza announced it had entered into an agreement to acquire online clothing and sports retailer Netshoes for US$62mn.

E-commerce giants B2W and Mercado Livre were also competing for Netshoes, but Magazine Luiza managed to obtain the exclusive right in negotiations.

The deal still requires the nod from Netshoes shareholders, as well as regulatory and antitrust approval.

Upon the successful completion of the transaction, Netshoes will become a Magazine Luiza subsidiary.

The deal will be carried out through a merger between Netshoes and a subsidiary of Magazine Luiza incorporated in the Cayman Islands, which means the transaction is not subject to all terms of Brazilian corporation law, Magazine Luiza stated in a release.

Magazine Luiza posted revenues of 5.94bn reais (US$1.51bn) in the fourth quarter of 2018, up 34.9% year-on-year. E-commerce sales grew 57%, reaching 2.2bn reais and 38% of total revenues.

The company will disclose its Q1 results on May 6.

Netshoes reported 566mn reais in sales in Q4, down 1% year-on-year, with registered members and active customers up 16.2% and 4.4%, respectively.

On April 26, Netshoes completed the sale of its Argentine subsidiary to the BT8 group.