Good morning, everyone, and thank you for standing by. Welcome to the conference call of GPA. For those who need simultaneous translation, we have this tool available on the platform. To do this, just click on the interpretation button via the globe icon at the bottom of the screen and choose your preferred language, Portuguese or English. For those listening to the conference call in English, there is an option to mute the original audio in Portuguese by clicking on the mute original audio.
You can download the presentation on the chat icon and on the company's IR website, where you can also find the material fact released yesterday. Please be advised that this conference call is being recorded. During the company's presentation, all participants will have microphone disabled. Then we'll start the Q and A session. We would like to point out that the information contained in this presentation and any statements that may be made during the conference call regarding the business prospects, projections and operational and financial goals of GPA constitute beliefs and assumptions of the company's management as well as information currently available.
Forward looking statements are no guarantee of performance. They involve risks, uncertainties and assumptions and therefore depend on circumstances that may or may not occur. Investors should then understand that general economic conditions, market conditions and other operating factors could affect GPA eighty's future results that could lead to results that differ materially from those expressed in such forward looking statements. Today with us are CEO of GPA, Georges Faizal and the CFO and Investor Relations Officer, Alarm Grass. I will turn the call to Georges Faizal to start the presentation.
Good morning, everyone. We are here once again to thank you. And I would like to thank the presence of almost 400 people here at our conference. And we are going to start an explanation of about twenty minutes with a summary presenting the transaction that we completed yesterday. It was a material fact that we have announced to the market and covered by many press outlets today.
It's a unique opportunity for us to explain and to give you a little bit more details about what guided our thoughts and what was the rationale behind the operation. So in a very summarized and straightforward way, Today, we are announcing and formalizing to the market a transaction that started a few months ago with the first conversations. It is a transaction that was initiated by the management of both companies, GPA and Assai. Both myself and Bill Miro from Assai have been discussing this transaction over the past few months. The transaction was did not take place last year because it was a very challenging year with many challenges and there was a transformation that we were implementing last year, which was the spin off that we completed in March in July 2021.
We also completed a significant business with 1 of our real estate owners, one of the main real estate owners, which made it possible for us to mature the acceleration of what we've been telling you, which is the optimization of our store portfolio. So we formalized a binding offer for the transformation for a transformational transaction where GPR will accelerate its expansion focus very much on the brands of Bao de Asucard and also our foodecom. For Assai, Assai will hold a specific conversation with you, but they are going to accelerate very much its route towards absolute leadership in cash and carry in Brazil. This transaction involves 71 of the 103 stores of the hypermarket in the country that will be converted to Assai. The 71 account for about 70% of sales in the hypermarket.
The added 32 stores will be held by GPA and 28 of them will be converted to Pao de Acucre and Mercato and 4 stores will be sold in the market. With this movement, GPA leaves the hypermarket in Brazil. Extra Hypermarkets was a brand that was launched in 1985 with thirty six years of existence, very challenging in the last decade, especially because of the advancement of cash and carry format in the country that is very strong in discount. It's price oriented. And cash and carry has been transforming itself in an increasingly working more and more for individuals and end consumers with fewer companies and businesses.
So it's been working for end consumers, offering more and more value propositions such as pets and also for fresh produce and products like butchery, bakery and then fruits and vegetables. So this is a very difficult moment for hypermarkets to thrive in this scenario, not just in the current scenario, but also considering the future. And we expect the cash and carry format will open between 500 to 600 new units in that country. So here, I'm not talking about Assai, but for the whole market in the cash and carry, considering publicly disclosed information. The amount of the transaction involved receivables to GPA of BRL 520,000,000,0.0 BRL 4 billion corresponding to the stores.
This is the main scope of the MOU with Assai and BRL 120,000,000,0.0 corresponding to properties of 17 stores that have been that are part of the transaction. These BRL 520,000,000,0.0 will be in 5 installments between December 2021 until 2024, adjusted by the CDI plus 1.2% on year. This is the installments with guarantees that have been agreed for the receiving. Now we are starting a major transformation of GPA group, where we are going to receive very significant funds to accelerate our growth to implement a transformational change and in the near future. In three years, we are expecting to have more than 60% share in Paungia Sooka proximity and e commerce.
So there will be a significant change and the net income will also have a positive impact in deleveraging. So we are going to leave behind major financial costs, especially with the high interest rates that we are having in Brazil. We are and it might go on for many other months and maybe even years. So we want to assure our sustained growth. So the attractive valuation for this transaction is SEK 520,000,000,0.0, considering that the revenues in the stores on the last twelve months was SEK 870,000,000,0.0, which represents 0.6 times the gross sales is twice as much as the current market value of GPA, which is considered 0.3 times of its sales.
This is a valuation that we find good, not considering the deal in itself, but also cash generation and operating profit profile in the period. With this, we already had considering Latin America, we had a very solid financial position and will be even more deleveraged with a strong flow of funds to support our investments in growth expansion, in conversion of stores, in renovation of assets, always looking into us delivering the best value proposition to a bunch of SUKA customers and then the extra and e commerce, extra customers and also e commerce. In addition to generating BRL4 billion of free cash for growth initiatives, wide ranging growth initiatives also that they're leveraging of our debt. We are going to invest about SEK 120,000,000,0.0 immediately in the most attractive brands of our portfolio. First transaction, as I said in the beginning, the idea was fully designed in Brazil.
There was no imposing from the controller, which is the same for the 2 companies. So as it is a transaction between related parties, we strictly follow the related parties' policies between GPA and Assai. And this transaction was voted specifically by independent members of both boards of directors of the 2 companies, not the common shareholders, but those representing Casinobro in Brazil, they refrain from voting in both boards of directors. The transaction was followed by financial consultants from many different banks in Brazil to whom we are deeply grateful and many independent law firms to whom we also thank for the help they provided over the past few months and of course, accompanied by a very, very professional consulting that supported all the negotiation and decision making, not just from the management of both companies, but also board members and committees. This is a transaction that doesn't require approval by the shareholders meeting.
It is a transaction that it needs to be approved by the Board of Directors and we strictly compliant with all policies of our organization. Now giving you a little bit more details about the transaction. So today, GPA taking out drugstores and gas stations, just talking about supermarkets, today we have six ninety eight stores total. So now we are reducing 71 plus 4 that will be sold. We are going to go down to six twenty three stores, 28 of them will be converted into Pongia Sukar and Mercado will go from three twenty eight to three fifty six immediately.
We will remain a national chain with transactions with 71 stores involved many different states in Brazil, in all regions of Brazil. This transaction was not concentrated in Sao Paulo and Rio. It involves many capitals in Brazil and Northeast, Belo Horizonte, Chiquoritiba, Rio De Janeiro. It involves many different states in Brazil. And we have made a decision of converting 14 Pao de Acucas stores and 14 stores will be converted to Mercado Extra.
And these stores have the specific features. So most of these 28, they are they have between 7000 square meters of sales. We call them compact. This is their future. Or the stores, they are inside shopping malls.
Most of them are in premium malls that used to be hypermarkets. Most of them will be converted into Pao de Acucre. So these 28 stores is very compliant with Pao de Acucre and Mercado Extra. And we might have 1 of the biggest Ponja Sukur stores in terms of footage that will be converted. The risk of this transaction as a whole is very much mitigated considering that this transaction is 1 shot.
So 1 of the advantages of having of doing business with Assai, which is a chain with national footprint with a very little overlap with their store chain. And we are going to do that in a very short time. So the demobilization of hypermarket stores will take no longer than four months, something like three or four months hypermarket stores will continue open and selling to consumers until Dec. 0, until New Year. Once we we start a rapid demobilization.
In thirty days, we'll be delivering all Assai stores to Assai so that they can start the renovation and remodeling and the conversion into a size store. So it's going to be very fast, very expedited. So it's a transaction within the same holding, which avoids lots of paperwork and approvals and also it expedites a demobilization plan or it facilitates the transfer of staff and it facilitates the preservation of employment. And it's not going to last for six months, a year, year and a half in GPA. Once we end the and then we are already working on what we consider the new GPA company focused on the development of its main platforms.
So what is this new GPA? First of all, we are going to strengthen what we refer to as core competencies, which are the most attractive businesses we have. With this, we are going to be a lighter company, a more fluid company, a company that would grow faster, a company that will no longer work in the defensive and will go and be more aggressive considering the most important format and its strengths. Obviously, we are talking common sense, but the brand, Anges Soccer, is going to be 1 of our major strengths in the country, both as for supermarkets that account for 26% of our business today, as well as Minuto Ponja Sucker, which is our proximity format, which are formats that are profitable in the retail market in Brazil. We are going to speed up very fast.
As we said in the latest calls, we are going to announce new figures, 100 new stores of Pangaea Sukur supermarkets that would include those 14 conversions, 14 conversions and 86 new stores, Pangaea Sukur in the next three years as well as other 100 Ponjacucar Menutos in the same period of three years. In addition to those 300 stores of the brand, Ponja Sukkar, we are going to renovate 135 stores at the same time that are currently existing, completing our process of transformation of Generation 7 that is going to grow above average of those stores which have not been converted so far. Our expansion organic expansion project and the premium and proximity formats have 3 pillars, basically conversions and new stores as well as renovations. And this is going to allow Ponja Sukkar, the Ponjazooka brand to account for more than 50% in the very short term, reaching about 60% in 2024, considering our business portfolio. It's obvious, but we'd like to point out anyway that Bonjassilcar is a double digit format of EBITDA margin and this is going to strengthen the profitability of the company and our net profit making our company being self sustainable.
It's always important to mention that the growth and the maturation of our supermarkets, the mainstream supermarkets both Comprebein and Mercado Peskstra are doing well. Gaining market share in the past three years in particular and these will also have 14 converted stores into the format Complibain or Mercado and an additional 50 stores that we call as retro fitting, which is an update of the concept with the proposal of value proposition related to the neighborhood. And with the proceeds, we are going to maintain in a flexible manner for strategic opportunities and potential M and A that can be presented for us at this time around. On the next chart, it's always important to mention that with this transaction, we have been able to increase the focus on our digital acceleration. It is a market that we estimate that in 2025 will amount to BRL 45,000,000,000 in opportunities only in food, digital areas BRL 7,000,000,000 from BRL 45,000,000,000.
We want to increase the market share in this pie for the future, all very attractive. Of course, you have been monitoring different digital players, lots of initiatives, many entrants in the Brazilian market to take up this opportunity that we can see. But GPA is in this market as an open collaboration platform. It's with this platform, we are going to launch an internal mantra saying that GPA is going to be where the client is in digital terms. If it's in the MercadoLibri, we are going to be together with MercadoLibri to be the best player at MercadoLibri.
If it is operating with any other channel like Food or Happy or Corner Shop whichever GPA is going to be there playing together with recurrence, with the strong brands, with a national logistic presence and with more than 700 stores serving as hubs of distribution. So it's a profitable e commerce, it's very important to point this out in very in bold letters, it's a profitable e commerce and so we can scale up our platform. We are going to maintain our main focus in home care and the food and these are the main categories where we operate. Kluby Ester is a successful platform, it's a very powerful brand. Even though we are closing the hypermarket, Extra is still a brand for the group in the e commerce segment.
It's very successful. Important opportunities are presented to us in the universe of utilities or bazaar of utensils, kitchenware and we are going to start working with appliances as of next month. It's a combined offer both in our sites as well as a collaboration with other participants in different markets. Our digital initiative, Pao de Suquat and Proximity are the 3 major platforms that we now refer to as Novoge Pera to the future. In summary and moving towards the end of the presentation so that we can open the Q and A session.
Okay. Can we move on to the next chart? As I've just said, Slide 7 please, we will discontinue the hypermarket format and we are resizing all the support, logistic, administrative costs structure. And this is something that's going to happen in the next year, but in the beginning of next year, we want to be moving towards this. It's a leaner company focused on those channels that I have just mentioned.
And so we are going to move from the defense position to an attack position focused on performance. That means that we are going to improve our clients' experience using those channels, investing in the places where we see the direction, yes, strategically speaking. Chart number 8, very quickly, we cannot forget that GBA continues to be a Latin American company in the Exodo, which is the controlling company as to financial numbers, we have $5,120,000,0.0 as revenues and with this transaction, we are going to lose revenues in the short term, but with the renovations and the conversions, our current structure without considering the future, we will go back to BRL44 billion. We are going to go back to the BRL50 billion level with all the organic expansions and maybe some inorganic expansions. Out of all those proceeds from this transaction, we are going to become a company whose cash position was already solid to a much more comfortable situation, deleveraged with cash available for new investments, BRL
4,000,000,000.
We consider to have for free cash to have initiatives for growth for the next years. Out of the BRL4 billion, we are earmarking BRL1.2 billion for short term investments, as I mentioned before, related to conversions, retrofitting and expansion and the final chart. As the main message is, our focus is on the core business on the new GPA, Sanjay Sooker, Proximity and Digital, number 1 in food retail industry with this open collaboration platform being where the client is, speeding up our digital platform, integrating not only all the sites and the experience with P3P and also getting closer to the client base, more than 20000000 clients already in our base and we are going to enhance our operational excellence as a company, as we have always been, but better. Continuous improvement at Vanguard, improving our value proposition. Bongja Stoker brand is not only a service brand, but we are at the top, we are ahead in the retail market and all those growth levers that I have already mentioned during the presentation.
And now the next steps in a very summarized way, we are going to start the diligence process due diligence process, which will take some months and then we are going to sign the definite agreements with all the stakeholders involved in the transaction with the owners of the assets. We are making agreements with the store owners and also with all the personnel, the FIE and everything done with transparency. Demobilization of commerce stores. And as I said, we want to finish this in the We announced all of a sudden, many of you did not expect this and we want to have record time mobilization internally. This is different from the spin off, for example, that involves lots of operational complexities that the GBA and all the teams, I'm sure they will conduct in the best possible way.
So I finished now my presentation, this quick presentation and this presentation is available should you like to refer to it, so you can see this material on our website and now I will open the Q and A session. Thank you. And now we are going to start the Q and A session. We'd like to remind you that to ask a question, click on the icon Q and A at the bottom of the screen and write your question to get in line. Let's move on to the first question from Luis Van Ays, Southside Analyst of BTG Pactual.
Luis, we are going to open your audio so that you can ask your question. Please I have a question, Faisal. If you could talk about the sales uplift of the stores that are going to be converted on the Bonta Sukkar brand? And what about the pet market? You said some conversions in premium locations close to shopping malls.
How can we what can we expect in terms of store productivity as you've done with Aber and other stores? Luis, thank you
for the
question. Luis, those converted stores, both for Bo and Mercado, we tend to keep them selling food when we do the conversions, different from Assai that has a net lift of 2.5, 2 point 7 times the stores that are going to be converted. We are going to maintain the format of Bancakzukar in the uplift of 1. It's a good business considering that the EBITDA margin of those stores are likely to increase from 2 or 3 points approximately with the sale of Ponjosucar. Ponjosucar is a richer format from the viewpoint of mix and varieties of perishables, especially special products, differentiated products.
So the commercial margin or the gross margin would increase in an organic way with these changes of those stores and that would contribute the EBITDA margin in a very, very significant manner to the company. If I could have a follow-up question relation to the conversions. What about drugstores and the fuel stations? As you have this conversion, are you going to maintain those stores inside the structure
or will there
be changes? Yes, we are going to maintain the stations, a few stations operating inside Assai stores with extra brand in most cases, as we do with the units of fewer stations that already operate and the conversions that were made in the past. As for drugstores, we are discontinuing this sector in GBA. We had already discontinued a number of stores in the past two years. The drugstore sector has a marginal contribution to the EBITDA of the group as a whole.
So it's an operation that we will discontinue since we are at this moment. So this is what we are now seeing now as well. Okay. Thank you.
The next question is from Daniella Iger, sell side analyst from XP. Daniela, you can open your microphone and ask your question, please. Good morning. Thank you very much, Faizal, for the presentation. And I have 2 questions.
1 is a follow-up on margins. And you mentioned that Minuto's margins are positive. And you mentioned the
Punta Suker banner. And I
don't know whether that includes Minuto. And I wonder what is the level and the level of normalized margins for CPA Brazil operations after the completion of the transaction. In the opening, you said that you're open to opportunities and especially with regional opportunities. Opportunities. And what is your mindset in terms of divestment in Brazil and also in terms of success?
Thank you for your question, Daniela. Well, Pao de Sooker margins, when we are talking about the supermarket, is double digit. The proximity margin is high single digit. So they are format with quite significant profitability in terms of our EBITDA margin for the group. And I do not yet want to announce any official numbers to you, but this transaction will contribute with a reduction of supermarkets and focus on bone.
And we hope a significantly higher EBITDA margin than the current 1. Once the company is normalized and we the conversion phase and renovation phase is behind us. And then we will be able to create a company that will use in terms of 1 shot proceeds. It's a company that will be self sustainable financially to fund its own growth in the future, looking into the future, looking into the long term. As to divestment, there is no plan for additional divestment right now by the holding neither in Brazil nor in Latin America.
And with these proceeds, our cash position will be much more significant in Brazil so that we can be slightly more aggressive players in M and A situations. Right now, there is no M and A and final studies about to be finalized. We have only very preliminary, very initial studies. So we focus first on the spin off and now on this divestment from hypermarkets. And now once the new phase starts and if everything goes according to our plans and then if we find the company that I am selling to you, and then there may be faster growth in a more robust manner.
I hope I have answered your question, Mario. It's very clear. Thank you very much, Faizal. Congratulations on the transaction. Our next question comes from Irma Skarsalzai, Anatoliz from Goldman Sachs.
Irma, please, you can open your I have 2 questions. Number 1, has anything changed in the last six or twelve months in terms of the vision you used to have or you still have of extra hip as I have here? I was looking into some notes of the call last year. And in that call, there was a question about hypermarkets and you highlighted the potential of about 30 stores and you said that right then it would make sense on revitalizing the hypermarket because hypermarkets were recovering. And of course, the pandemic helped a little bit.
And then in the beginning of this year, the time of the spin off and obviously, right then, you announced the new pricing policy for extra hyper. And so is this something recent? What drove you to no longer want to keep the hypermarket? I think I agree, but I am really surprised what changed and why did it change so fast. Of course, I know there was a pandemic and it may have contributed to that change of mind.
And still on Colombia and Exitos, assets over there that are some major benefits for hypermarkets and there are a few stores in a format that is more similar to Cash and Carry and Assai. Wouldn't you have an opportunity there to convert more stores to the Cash and Carry format? And would it make any sense to keep it under Pontiac Suker? Or maybe you could be included in a player focusing on that kind of format? Irma, thank you very much for your question.
It's good because it gives me the opportunity of explaining this issue better. So starting from Colombia, I'm going to be a little bit more superficial in answering about Colombia. The Colombian market is completely different in terms of distribution of food, in terms of the food chain, supply chain and retail. So Esito Holding has been working on a cash and carry format in Colombia, and it's been successful in that format over the past few months, especially. It is a format that is quite different from the Brazilian cash and carry with sales surfaces or footage of 3000 or 4000 square meters in contrast with 7000 square meters as we have in Brazil for Assai.
The B2B in Colombia has different geographies, different geographies, different discounts. If we just copy and paste Assai from Colombia, the success will be slightly more complicated also considering that Atacadone. So there are completely different realities and the success of Exito hypermarket. They've been working on a value proposition and service proposition that we call Wall Esitu that is very successful in its implementation. They have really amazing results this year.
So it doesn't really make much sense to make any direct comparisons that it must be regarded through the specific perspective of each market. Now we have kept our principles and still keep the principle that hypermarkets, that an expensive hypermarket is dead. So those of us who do not significantly invest in competitiveness within the hypermarket may run into many problems. We had our project with wholesale prices. It was very successful up to a point.
It is a project that we reduced the gross margin to seek sales elasticity of at least 15% to 20% so that the projects could be sustainable. This project was very successful during the pandemic. So when this year, the project depends on the perception of prices in consumers' mindsets in combination with the worst or with the highest food inflations in the last decade. This is very unlikely success. So the market has suffered a lot this year.
It's still suffering not just in terms of food sales with a drop in food volumes, but also significant drops in electro electronics, which is important but has an important share in hypermarkets of the future. So the project was going well, but at the wrong timing maybe. So and we have been thinking a lot about that in much more depth. And we've been looking into cash and carry growth estimates in the country for the next five years, considering public data as reported by Assai, Takadan and many other regional players. We are seeing that cash and carry will grow by about 500 to 600 additional stores in a country in the next few years.
So cash and carry could go through a gradual shrinking and a conversion of hyper extra being converted little by little every 5 or every 10. But we preferred to anticipate it and to do it before and make big decision right in the beginning. Instead of investing a lot of effort for a little bit, we are going to invest our efforts in our main return platforms, namely Paungastuk proximity and digital. Yes, Irma, our mindset changed. So as we thought more and more about this issue and this was really a brave decision and bold business decision that will add a lot of value to our shareholders as a whole.
Thank you, Irma, for your question. Our questions and answer session has now ended. Now I would like to turn the conference over for the company for their closing remarks. Well, once again, I would like to thank everyone. And as I would like to remind you all that Apicar three is a company that is listed in the stock exchange considering all our stakes, not just in Brazil, but our interest in international groups, for example, in Colombia and in other countries.
As a reminder, we are talking a company of about SEK 5,000,000,000 gross revenues and we are talking about a company that from now on is much lighter, much more deleveraged with much more of its own funds to invest in its own growth and evolution. And we hope in this manner to have much more consistency for execution and stability to and much more value to provide to our customers. I would like to thank all those who have been involved internally, especially our employees who are listening to us, a highly competent team, very professional that know how to do things, leaving assigned emotions and focusing very much in the future and in adding value to our company. So thank you all very much. Thank you for your attention.
I would like to thank our analysts, investors that support us and that are together with us right now. Thank you all very much, and I hope to see you soon again. Thank you. The conference call has now ended. The Investor Relations department is available to answer any other questions you may have.
We thank all participants very much and we wish you all a very good day.