Brazil fashion companies Arezzo, Soma agree merger

Brazilian fashion companies Arezzo and Grupo Soma said on Monday they had agreed a merger to form an entity with revenues of 12 billion reais ($2.42 billion) to be 54% controlled by Arezzo.

The companies, which will bring together more than 2,000 company-owned and franchised stores and 34 brands, will later choose the name of the new company, which will have Grupo Soma's shareholders owning the remaining 46%.

The exchange ratio established in the agreement stipulates that Soma Group shareholders will receive 0.12 new Arezzo&Co shares for each Soma share they hold.

The new company will be headed by Alexandre Birman, the current CEO of Arezzo&Co.

The merger comes as Brazil's fashion sector, which includes Lojas Renner, Guararapes and C&A, has seen increasing competition in recent years, with rising interest rates and the entrance of Chinese online fast-fashion retailer Shein in the country.