SAO PAULO, Jan 31 (Reuters) - Brazilian fashion companies Arezzo and Grupo Soma said on Wednesday they are in talks about a potential combination, though no binding agreement had yet been reached.
The deal could create a major player in Brazil's fashion sector. The two companies had combined gross revenue of 8.7 billion reais ($1.8 billion) in the first nine months of 2023.
The potential move comes as Brazil's fashion sector, which includes Lojas Renner, Guararapes and C&A, has experienced increasing competition in recent years, with rising interest rates and the entrance of Chinese online fast-fashion retailer Shein in the country.
Soma, which owns apparel brands, and Arezzo, a premium shoemaker that has been expanding its operations, said in separate filings on Wednesday that the deal could involve combining their shareholder bases into a single company with shared governance.
Local business outlet Neofeed, which had reported the talks earlier on Wednesday, said the deal would be carried out through a stock swap.
Arezzo Chief Executive Alexandre Birman would lead the combined company, while Soma's CEO Roberto Luiz Jatahy would remain in charge of the brands he already commands, according to the filings.
In afternoon trading, shares in both companies led gains on Brazil's benchmark Bovespa stock index, with Soma jumping 17% and Arezzo up 13%.
Arezzo and Soma have been busy with acquisitions in recent years, with Soma buying rival Hering in a deal announced in 2021, while Arezzo has acquired since 2020 firms including Italy's Paris Texas and local brands Reserva and Carol Bassi.
A
potential tie-up
between Arezzo and Soma was reported in 2021 by local media.
Soma owns more than 1,000 stores, including franchises, and had a market value of 5.3 billion reais at Tuesday's closing share price. Arezzo, which has about 960 stores including more than 10 outside Brazil had a value of 6.2 billion reais. ($1 = 4.9392 reais) (Reporting by Andre Romani; Editing by Anthony Esposito and Cynthia Osterman)
