published Aug 10th 2016, 5:54 pm, by Isabella Cota

(Bloomberg) —
Wal-Mart Stores Inc.’s Mexican unit agreed to sell its Suburbia clothing chain to El Puerto de Liverpool SAB, Mexico’s biggest department store chain operator, in a deal valued at 19 billion pesos ($1.03 billion).

The transaction, which involved 119 stores, is subject to regulatory approval, Wal-Mart de Mexico SAB and Liverpool said in statements Wednesday after markets closed. Liverpool will pay 15.7 billion pesos, assume 1.4 billion pesos of debt and distribute an additional 3.3 billion pesos to shareholders after the deal is completed. As part of the deal, Liverpool will also pay rent to Walmex for all 34 store locations where Suburbia stores stand alongside Wal-Mart stores.

The deal lets Walmex get out of a business it no longer considers part of its core operation of discount retail and grocery stores, which are riding a wave of growth in consumer spending. Walmex, a publicly traded unit of the Bentonville, Arkansas-based retail giant, announced last week that July sales rose 12.1 percent from a year ago at stores open at least a year, almost double the 6.8 percent rise in the previous month.

“We are totally focused on our main business and our target is to double our total sales by 2024,” Walmex Chief Executive Officer Guilherme Loureiro said in the statement sent to the Mexican stock exchange.

This is the second purchase this year by Mexico City-based Liverpool, a high-end department store chain that’s seeking to diversify. The company agreed last month to buy a stake in Chile’s Ripley Corp SA, sending its stock plunging, as disappointed investors were hoping the company would expand domestically.

The deal was announced after trading closed Wednesday. Walmex shares are little changed this year, while Liverpool has dropped 9.7 percent.

To contact the reporter on this story: Isabella Cota in Mexico City at icota@bloomberg.net To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net
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