Magazine Luiza acquires Brazil's geek e-commerce platform KaBuM! for BRL 1 billion

Brazil's e-commerce giant Magalu announced a follow-on of almost BRL 4.6 billion, which it will use to pay for new acquisitions and expand shops and distribution centers across Brazil

Magazine Luiza Brazil
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Brazilian most valued retail and e-commerce chain Magalu announced on Thursday a follow-on of nearly BRL 4.6 billion, which should issue 150 million new shares, and the acquisition of KaBuM!, a technology and games e-commerce, for BRL 1 billion.

The syndicate of banks responsible for the follow-on offer is led by Itaú and BTG Pactual and also includes J.P. Morgan, Merril Lynch, Banco do Brasil, Bradesco, Goldman Sachs, Morgan Stanley, Santander and XP.

READ ALSO: Magalu wants to grow in on-demand grocery services and reduce the delivery time of third-party sellers

The proceeds from the stock offering will speed up investments in logistics, with the opening of new distribution centers and hubs, and the payment of acquisitions, such as the purchase of 100% of KaBuM! itself and Hub Fintech, acquired in December 2020 for BRL 290 million.

READ ALSO: Why Amazon in Brazil is not as big as you might expect

Magalu expects to end 2021 with 1,440 brick-and-mortar stores, 1,560 shops in 2022, growing to 1,680 in 2023. The company also plans to expand warehouses to 26 this year, 30 next year and 33 in 2023.

“With the acquisition of KaBuM!, we have consolidated ourselves as one of the leaders in Brazilian formal e-commerce and strengthened our presence in one of the fastest growing markets in the world: that of products for geeks and gamers,” said Frederico Trajano, CEO of Magalu, in a press release.

In a year and a half, Magalu bought 21 companies

The acquisition of KaBuM! is the largest deal of the 21 acquisitions Magalu has made in a year and a half. The total amount of the acquisition will be paid in three stages. The first installment will be in cash: BRL 1 billion.

The second stage involves the transfer of 75 million Magalu ordinary shares over a year and a half. The third stage payment – of up to 50 million shares – will take place in January 2024 and will be conditional on KaBuM! meeting targets.

READ ALSO: Brazilian retail giant Magalu makes its seventh acquisition of 2021: the debit and credit cards processor Bit55

KaBuM! was founded in 2003 in the city of Limeira, in São Paulo’s state. In the last 12 months, it had gross revenue of BRL 3.4 billion and a profit of BRL 312 million.

With the acquisition, Magalu strengthens itself in the gamer market, which grows exponentially in the world and in Brazil. In April, the retailer bought the multimedia platform Jovem Nerd, focused on the nerd and geek public. The bet is on the market, not only in potential, but already existing: according to the e-sports consultancy BBL there are 95 million gamers in Brazil.

From now on, KaBuM! will operate in cooperation with Jovem Nerd and Canaltech, a technology site bought last year by Magalu.

READ ALSO: Magazine Luiza: e-commerce drives growth and already gets 70% of sales

KaBuM! has 2 million active customers and is one of the precursors in e-sports in Brazil. It created one of the biggest League of Legends teams in the country, KaBuM! Esportes, four-time national champion and the first Brazilian representative in the world championship. KaBuM! Esportes also supports other e-sports modalities, such as Counter Strike, FIFA and Free Fire.

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