Walmart Inc. (NYSE: WMT) said on Monday it sold 80% stake, upwards of $4.5 billion worth of net loss, of its struggling Brazilian operations to private equity firm Advent International Corp. to exit its business in the failing foreign business.
The retail store is looking elsewhere for business by investing into stores in China and India overseas. The company announced a $16 billion deal for a stake in Flipkart, India’s largest e-commerce retailer, while cutting off struggling foreign markets. Its Brazil branch has performed poorly in operational issues for the past decade during a time of recession and Walmart is giving up most of its stock, while it will still retaining 20% stake.
Advent will acquire the 80% stake, including the 438 stores and 55,0000 workers. The company will not be paying Walmart for the unit as well, but it could receive up to $250 million from Advent in the future depending on how the stores perform in the future, according to Advent spokesman Randy Hargrove. Walmart has not disclosed financial statements for this transaction yet.
Walmart’s international business has been struggling, making up less than a quarter of its total revenue of $500.3 billion. Walmart Chief Executive Doug McMillion has tried to reconcile its international performance in January by appointing Chief Operating Officer Judith McKenna to take over the international unit.
Walmart has been looking for people to buy its Brazilian business since last year but received no buyers according to a source. It operated at a loss in Brazil for seven consecutive years after it was left with poor locations, operations, labor troubles, and uncompetitive sales.
Advent is expected to invest mainly in the cash-and-carry business where big box stores sell groceries and other staples in bulk quantities as a wholesaler. The unit will act as a wholesaler to attract consumers looking for a bargain. With the 20% stake still in the business, Walmart’s management team is expected to work with the Advent partner to “create a more agile and modern company” according to Patrice Etlin, managing partner at Advent International.