Basle-based Dufry has announced that it has signed a binding agreement with the privately-owned Brasif Group to acquire the Brazilian company?s travel retail business, as well as its Eurotrade logistics arm for $500m.

Brasif is the leading duty free operator in Brazil and has been present in the Brazilian travel retail market for more than 20 years. It operates 48 shops with a retail surface of approximately 12,000sq m and has close to 1,500 employees.
Dufry says the two acquisitions (at $250m each) will be jointly financed by Dufry (80%) and certain funds managed by the main shareholder of Dufry, Advent International Corporation (the remaining 20%).
In a statement, Dufry said: ‘With Brasif travel retail?s leading position, high-quality concessions portfolio and in-depth knowledge of the local market, the transaction matches Dufry?s strategy of developing long-term concessions in emerging markets. This new operation is complemented with the strengthening of Dufry?s Americas? logistics platform through the acquisition of Eurotrade.
‘Dufry's 80% stake in these acquisitions shall be fully financed through a structured bank financing which shall also provide Dufry with additional means for further expansion and growth. The transaction is expected to be closed no later than March 23, 2006.
‘Through these new acquisitions, Dufry reinforces its position as a worldwide leader in the travel retail industry in terms of sales and profits and shall have a presence in 33 countries, operations in more than 60 airports and a total workforce of about 6,000 people.’
In The Americas and Caribbean, Dufry currently operates around 150 shops over 23,822sq m of space. The company presently operates in Aruba, Barbados, Bolivia, Grenada, Mexico, Nicaragua, Saint Lucia and Trinidad and Tobago and last month it opened one of the largest duty free airport mall concepts in the world at Mexico City International Airport.
Comment: Anyone who doubted Ceo Julian Diaz when he said two years ago that Dufry would look at aggressive expansion will now be silent. While Dufry might have missed out on buying Aldeasa last year, the acquisition of Brasif is a logical extension of its business in South America.
In truth, it is also a good move for Brasif, since the company has struggled to try and expand its business outside of Brazil for more than ten years, bidding sensibly for duty free contracts like Miami (twice) but for little reward.
Brasif suffered a particularly bad time in the late nineties following a wave of devastating currency devaluations in South America. At that time it saw nearly $100m wiped off of its annual sales turnover of nearly $300m. But the company has since recovered well and invested substantially in its airport operations. These comprise arrivals and departures stores at both of its biggest locations at S?o Paulo's Guaralhos International Airport (Brasif?s most profitable location) and at Rio de Janeiro's Gale?o International Airport. Brasif also operates stores at the airports of Belo Horizonte, Porto Alegre, Campinas, Recife and Bras?lia.
S?o Paulo?s arrivals shops are Brasif?s most successful operation and these benefit, along with other locations, from the $500 inward allowance for visitors and nationals alike.
The deal with Dufry also comes almost ten years after DFS Group, BAA and several other companies were approached by Brasif?s merchant bank Goldman Sachs to buy the company in August 1997.
But the price tag of $1.2bn at that time was deemed too high, even though Brasif generated $350m to $400m in annual sales in those days, with a net profit of around 13% to 14% ($52m to $56m).Dufry?s timing for this acquisition is also good. After a tough four years, Brazil welcomed a record breaking 6.78m foreign tourists in 2005, up 10.53% on 2004 according to the country?s airport authority Infraero.
Foreign tourists spent a total of $3.861bn in Brazil in 2005 representing a whopping 19.83% year-on-year increase, according to the country?s Central Bank, which also reports that tourist spending per head was up significantly last year.
Brazil is now ranked at 40 amongst the world?s most popular holiday destinations and the country has doubled its income from foreign tourists over the last three years.
The government has also set a target for Latin America?s largest country to be amongst the top ten global holiday spots by 2010, according to Tourism Minister Walfredo Mares Guia. The government has also stuck by its promise to deliver the tools to the Tourism Ministry. Mares Guia's budget has actually tripled since 2003, while some other government departments have had their budgets cut in an effort to manage the country?s debt.
But looming up this October/November is Brazil?s Presidential election and while many sceptics have been won over now they can see that Lula?s left wing politics have not buried the country, individuals within his Workers? Party government have been plagued with scandals.
Whoever is elected, the outside world will be hoping that Lula?s reformist policies – which some say were adopted from his predecessor Fernando Henrique Cardoso ? will continue and particularly in the untapped area of tourism.
Currently Brazil is on target to create another 1.2m jobs in the tourism sector by 2007 and the Brazilian Tourism Plan envisages that Brazil can attract 9.0m foreign tourists by 2007.