Brazil's Grupo ABC Sells 20% Stake To Private Equity Group

Company Will Spend Funds On Acquisitions For Further Growth in Brazil, Mostly Outside Sao Paulo

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Brazil's Grupo ABC advertising and marketing group is selling a stake of about 20% for $84 million to a Sao Paulo-based private equity firm and hedge fund called Kinea.

Grupo ABC's Nizan Guanaes
Grupo ABC's Nizan Guanaes

Grupo ABC is ranked by Ad Age as the world's 18th largest agency company, with worldwide revenue of $448 million in 2011 from about a dozen agencies and marketing services companies, almost all in Brazil. Holdings include Brazilian ad agency Africa and a 40% stake in DDB Brazil, and U.S. agency, San Francisco-backed Pereira & O'Dell. Grupo ABC was started in 2002 by Nizan Guanaes, a former head of DDB in Brazil, with several local partners.

Guga Valente, ABC's chairman, said the investment will enable Grupo ABC to continue growing and making acquisitions, largely in Brazil. "Sao Paulo is crowded because global networks like WPP and Omnicom make a lot of acquisitions there, but when you look at the rest of the country, there's still a lot of opportunity to consolidate markets," Mr. Valente said. "Our focus is always Brazil."

In the future, he said, when Grupo ABC needs to expand outside Brazil, the company's international brand will be Pereira & O'Dell.

"Everything we do in advertising outside South America should be done with the Pereira & O'Dell brand and by Andrew O'Dell and PJ Pereira," he said. "But right now our priority is Brazil. With the World Cup [in 2014] we expect the advertising market to grow about 20% in Brazil. And after that we still have the Olympic Games [to be hosted by Brazil in 2016]."

He said Grupo ABC has spoken with global groups like WPP and Omnicom, but prefers to build a sizeable Brazilian group rather than operate as a part of an international group.

Mr. Valente said private equity companies like Kinea usually hold their stakes for 5 to 7 years, and after that Grupo ABC could either do an Initial Public Offering (IPO) in Brazil, or seek another partner to replace Kinea. Right now, the three main partners, Mr. Guanaes, Mr. Valente and Bazinho Ferraz, who brought event planning into the group, own close to 60% of Grupo ABC, Mr. Valente said. Icatu, a Brazilian bank that has worked with Mr. Guanaes' ventures for many years, owns about 20%.

Over the last couple years, Kinea has taken minority stakes in Brazilian businesses including a chain of English language schools and a car rental company. Kinea is backed by one of Latin America's largest banks, Banco Itau, a client of both Africa and DDB in Brazil.

Cristiano Lauretti, the partner responsible for private equity at Kinea, said in a statement "The Brazilian consumer market growth and major global events like the World Cup and the Olympics show a positive horizon for the industry and especially for Grupo ABC."

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