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ACON earns 13.5x on Brazilian supermarket

TPG-affiliate ACON Investments has completed its second exit from a Latin American supermarket chain, with the sale of GBarbosa to strategic buyer Cencosud.

US firm ACON Investments has sold Brazilian supermarket chain GBarbosa to Chilean supermarket retailer Cencosud. ACON did not disclose the size of the deal, but an industry source placed ACON’s return at 13.5 times its originally equity investment.

ACON bought GBarbosa from global conglomerate Royal Ahold in March 2005. Since then, GBarbosa’s revenues have grown from R$1 billion ($576 million, €392 million) to R$1.9 billion. The company is now the fourth largest food retailer in Brazil.

The success of the investment was partially driven by GBarbosa’s credit card offering, said ACON co-founder Ken Brotman. Given that GBarbosa’s customer base is largely low-income, the availability of credit was an important driver of their continued consumption, Brotman said.

Earlier this year ACON hired UBS and Merrill Lynch to prepare GBarbosa for an initial public offering in Brazil. But before GBarbosa listed, the company was approached by several strategic buyers and decided to pursue a sale to Cenocud.

The deal is ACON’s second exit from a Latin American supermarket chain. In August 2006, ACON sold its 35 percent stake in Colombian food retailer Carulla Vivero to Colombian retailer Alamacenes Exito for approximately $245 million, earning a four times return on its initial investment.

ACON was founded in 1996 by Brotman, Jonathan Ginns and Bernard Aronson, formerly an international advisor to Goldman Sachs on Latin America and Assistant Secretary of State for Inter-American affairs. The firm is affiliated with the Texas Pacific Group.

Several other private equity firms have bought supermarket chains this year. In October Morgan Stanley Private Equity paid $310 million to acquire Tops Markets from Royal Ahold, and this summer Apollo bought organic chains Henry’s Farmers Market and Sun Harvest Farms as add-ons for portfolio company Smart & Final.