--Alsea buys minority stake in clothing, consumer-goods retailer
Axo
--Investment in-line with Alsea's appetite for top foreign
brands
--Company also studying purchase of Walmex restaurant chain
Vips
By Amy Guthrie
MEXICO CITY--Mexican chain-restaurant operator Alsea SAB
(ALSEA.MX) said Monday it has agreed to purchase a 25% stake in
Grupo Axo, which imports and distributes well-known foreign
clothing, cosmetics and home-goods brands in Mexico, broadening
Alsea's retail reach even as the company hunts for more restaurant
property.
Financial details for the Axo investment weren't disclosed.
Axo operates more than 116 free-standing stores and 2,200
shop-within-a-shop concepts at department stores in Mexico for more
than a dozen brands, including Brooks Brothers, Crate & Barrel
and Sephora. Steady employment gains in Mexico have lifted incomes
in Latin America's second-largest economy, and economists project
healthy economic growth in the years ahead, making the country more
attractive for global retail brands.
Alsea Chief Executive Fabian Gosselin said in a phone interview
that the Axo deal fits well with Alsea's goal of diversifying into
non-food retail and boosting its profit margins, while the minority
stake will allow the food franchise operator to slowly get more
familiar with Axo's business. Alsea operates brands such as
Domino's Pizza, Starbucks, Burger King and California Pizza
Kitchen.
Within the food realm, Alsea continues to hunt for a Mexican
restaurant chain and a casual steakhouse concept to add to its
portfolio of nine restaurant brands, Mr. Gosselin said.
The franchise operator is also studying the purchase of Wal-Mart
de Mexico SAB's (WMMVY, WALMEX.MX) Vips restaurant chain, Mr.
Gosselin said. "Without a doubt Vips is interesting, since it fits
within our core," he said.
Walmex, as the Mexican unit of Arkansas-based Wal-Mart Stores
Inc. (WMT) is known, said earlier in June that it is looking to
unload Vips, which turned out earnings before interest, taxes,
depreciation and amortization of roughly $51 million last year on
sales of $561 million. Analysts figure Vips could sell for anything
between 4.6 billion Mexican pesos ($345 million) and MXN10
billion.
Vips has 364 locales, many of which are in prime locations
within metropolitan Mexico City, the economic heart of Mexico.
Alsea operated 1,431 units in Mexico, Argentina, Chile and Colombia
as of the end of March.
Axo, founded in 1994, is looking to take its business to the
next level, which could include expanding into other parts of Latin
America, Axo vice-president Carlos Miranda said in a joint
statement with Alsea.
Executives at Alsea and Axo have gotten to know each other over
the years through their work in shopping centers, Mr. Gosselin
said, and both sides saw potential to grow together. Mr. Gosselin
compared the new retail scope to when Alsea added hamburgers to its
pizza business, and to the company's expansion into South America,
saying that Alsea has been adept at assimilating additional
concepts and markets.
In the case of Axo, the retailer's management will stay on,
allowing Alsea to slowly learn via the association.
Alsea had around $64 million in cash at the end of March, but it
is likely to tap debt to finance part of the Axo investment, Mr.
Gosselin said. The company raised MXN2.5 billion last week by
selling five-year notes in the Mexican market.
Alsea shares closed down 2.5% at MXN28.75 Monday as stocks fell
broadly.
Write to Amy Guthrie at amy.guthrie@dowjones.com