Contxto – Early this June, the Mexican Federal Commission of Economic Competence (Cofece) announced its opposition over Walmart acquiring the Mexican-Chilean startup, Cornershop.
Walmart stated that it was acquiring Cornershop for US$225 million in 2018. The goal was to sell the delivery startup to Walmex, the Mexican and Central subsidiary. However, that scheme seems to be facing serious road bumps based on recent developments.
According to a statement from Walmart Mexico to the Mexican Stock Exchange, “Walmex informed its shareholders and the investing general public that Cofece notified its majority shareholder, Walmart Inc., of its opposition to the purchase of Cornershop, Inc.”
Meanwhile, the retail giant has been analyzing viable solutions and feasible regulatory alternatives or measures to continue pursuing the acquisition.
In September, Walmart declared that this specific transaction was “very special for Walmex.” If successful, it would make the enterprise one step closer to becoming the largest omnichannel retail store in the country.
Not everyone seems pleased with the results so far.
“They notified us today and we will analyze measures that we will adopt,” said Gabriela Buenrostro, Deputy Director of Corporate Communication at Walmart Mexico and Central America.
“We are disappointed since we are sure that this operation is positive both for the competitive environment and the consumer. That drives the development of electronic commerce in Mexico.”
Contxto reached out to Cornershop officials and other parties involved to better understand the situation. El Financiero also tried to contact Cofece, but still hasn’t received an official response, either.
Under the Law of Economic Competition, the agency apparently can’t make any official statement for 24 hours until all “economic agents” are notified.
Update 1 – June 4, 2019
Following the opposition, Mexican authorities cited the Federal Law of Economic Competition. This allowed involved parties to potentially modify the agreement and request better conditions to proceed with the operation. Nonetheless, Cofece released a statement saying that the presented conditions did not suffice.
“In this case, the commitments proposed by Walmart and Cornershop were insufficient to avoid the possible negative effects of the merger,” it explained.
Also, it said that “the economic agents requesting the concentration have the right to go to the Judicial Branch of the Federation so that the legality of the commission’s action can be reviewed through an indirect injunction trial.”
Update 2 – June 20, 2019
In a recent series of tweets, it appears as though Cornershop isn’t in the worst of shape after all. At least based on CEO Oskar Hjertonsson’s recent Tweets, one of which said that “The Cornershop team is fine. More than good. It’s impressive. If we were a football team, we’d win the World Cup final from Brazil 10-0.”
What really sparked people’s attention, however, was his first tweet. With little official information available, Hjertonsson ultimately said that Cofece’s decision to stop the acquisition was final, and there was no looking back from that.
Cofece’s announcement served as a wake-up call to every single entrepreneur and investor in the region. While the occurrence might not have killed trust on the ecosystem entirely, it certainly got people pondering and thinking about future instances and/or potential similar cases.
-VC and JA