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Summary of Proposed Investment
This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.
Retail (Including Supermarkets, Grocery Stores, etc.)
Reg Manufact, Agri & Services, CAF/CLA
Date SPI disclosed
February 28, 2007
Projected board date
March 30, 2007
Invested: August 2, 2007
Signed: June 29, 2007
Approved: June 19, 2007
View Environmental & Social Review Summary (ESRS),
Sodimac Colombia S.A. (Sodimac or the company) is the largest home improvement retailer in Colombia, operating in the modern sector of the country. Since its inception in 1993, Sodimac has grown steadily reaching 10 stores in five cities (Bogota, Cali, Medellin, Barranquilla and Pereira) under two formats and brands targeting different segments: “Homecenter” and “Constructor”.
Sodimac is seeking from IFC a $50 million long-term corporate loan (in its equivalent in Colombian pesos), of which the first $35 million would be committed and utilized in the near term, and the remaining $15 million would be committed in the next few years. The IFC loan would be utilized for Sodimac’s corporate financing needs, including for its expansion program to be implemented during the next 2-3 years and the refinancing a portion of its existing debt. This investment is an important part of its long-term growth strategy.
Project sponsor and major shareholders of project company
Sodimac is the result of a 51:49 joint venture amongst Grupo Corona (Corona), the leading building materials and ceramics conglomerate in Colombia, and S.A.C.I. Falabella (Falabella), the second largest retail chain in Latin America (and the largest in Chile).
Corona is a blue chip, Colombian corporate with over 125 years of operations in Colombia. Its core activity is the production and distribution of construction materials and home-improvement products. The group exports its building material products to more than 25 countries with Colombia and the United States being its main markets.
Falabella is one of Chile’s largest companies and the largest department store retailer in Latin America with over 50 stores. Founded in 1889 it has operations in Chile, Colombia, Argentina and Peru. With its Falabella and Sodimac brands, the Company is currently the leader in the department store and home improvement markets in Chile. In addition, the company operates Banco Falabella to supports the credit card business and it entered food retail industry in 2004.
Total project cost and amount and nature of IFC's investment
Sodimac has requested IFC to provide a long-term $50 million corporate A Loan for the company’s corporate needs, including to refinance a portion of its existing debt and to finance their expansion program. The first $35 million of the IFC A Loan would be committed and utilized in the near term, and the remaining $15 million would be committed in the next few years.
IFC investment as approved by Board
50 million (USD)
IFC Investment (million USD)
* These investment figures are indicative
Location of project and description of site
Sodimac is headquartered in Bogotá, Colombia and operates 10 stores in five cities (Bogota, Cali, Medellin, Barranquilla and Pereira). The specific locations of the new stores have not been determined yet. However, the Company’s store expansion will be focused in the main cities in Colombia where the company is already located and might also include some other smaller city in the country.
Anticipated development impact of the project
- Providing consumers with a wide range of good quality home improvement and building material products at an affordable price. By selling a wide range of products and through economies of scale, Sodimac has gained a good bargaining position with suppliers. This bargaining position is expected to strengthen further with the construction and operation of the new stores and will enable the company to pass on some discounts to the consumers. Management’s effort to track consumer preferences allows achieving better inventory management and lowering costs, while at the same time improving service quality.
- Upgrading business practices: Sodimac’s operations have a catalytic effect in developing and improving the quality of local suppliers and producers. Since a significant part of the product range is sourced locally, the company will continue to work closely with local suppliers and producers to improve their quality in order to meet Sodimac’s quality standards.
- Promoting SME and private sector development: Sodimac’s operations and the implementation of the project will continue to have a positive effect on the development of the home repair/improvement and construction services industry. The project would facilitate market entry and improve service quality through standardization, larger selection of products, and reliable supply.
- Increased employment: The project will create new employment, both directly and indirectly. It will provide direct employment to approximately 850 employees, with a significant multiple of that number expected to be added in the supply stream and in ancillary activities.
IFC's expected development contribution
IFC can play a key role in Sodimac and Corona by being a long-term partner to support the expansion and internationalization of the Company and Corona. In this specific potential transaction, IFC would set a precedent that Sodimac can borrow long-term funds internationally, paving the way for other international lenders to become more actively involved with the Company. In addition, IFC will support Sodimac’s efforts to develop new SME suppliers in Colombia through a potential technical assistance program.
Environmental and social issues - Category B
This is a category B project according to IFC’s procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result that can be avoided or mitigated by adhering to generally recognized performance standards, guidelines, or design criteria.
The following environmental and social issues were identified:
- Company’s ability to assess social and environmental risks and impacts of their operations;
- Labor and working conditions;
- Occupational safety and health and life and fire safety standards of all existing operations;
- Air emissions, ambient noise, workplace conditions, liquid and solid waste management (construction and operations), handling of hazardous materials and waste, emergency preparedness and response.
- Community health and safety during construction period, as well as operation, particularly exposure to hazardous materials and disease. Emergency preparedness and response systems will be assesses.
- Land Acquisition and Involuntary Resettlement;
- Sodimac is addressing all impacts and risks as detailed in the Environmental and Social Review Summary.
For inquiries about the project, contact:
Ana Lucia Montoya G
Financial Planning Manager
Carrera 68D # 80-70, Bogota – Colombia
Environmental documentation will be made available in the following locations:
Carrera 68D No. 80-70
and on the company's web page:
For inquiries and comments about IFC, contact:
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
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