Carlyle buys Brazilian toy retailer The Carlyle Group has bought a majority stake in a large Brazilian retail toy shop chain as foreign private equity firms seek investments tapping the growth of the country's middle classes. The company bought an 85 per cent stake in Ri Happy, Brazil's largest retail toy chain, giving it access to an industry that is estimated to have more than doubled in sales in the five years to 2010 but which still has more room to grow. "Brazil's toy industry is extremely under served - the spending on toys per capita in Brazil is one-third of that of Mexico," said Juan Carlos Felix, managing director for Carlyle in Brazil. He did not give details of the value of the deal but said Carlyle planned to invest R$200m in the company over the next three years. The majority takeover marked the US buy-out group's fourth investment in what has become one of the international private equity sector's hottest markets. In Brazil, Carlyle also owns CVC, a tourism operator, Qualicorp, a health plan broker and Scalina, a lingerie manufacturer. The acquisition comes as buy-out groups have raised billions of dollars to invest in Brazil but dealmaking has slowed amid uncertainty over the global economic outlook. According to figures from Dealogic, Brazil has recorded $102m in private equity deals so far in 2012. Last year, the total volume was $336m, a fraction of the $5.6bn recorded in 2010. The biggest deal on record was the $1.8bn acquisition of an 18.7 per cent stake in independent investment bank BTG Pactual by a group of sovereign wealth funds and other investors in late 2010, Dealogic said. Founded in 1988, Ri Happy has 114 stores across 18 states in Brazil and 2,300 employees. Industry estimates put the value of the country's toy market by sales at R$3bn in 2010 - more than double the R$1.3bn of sales recorded in 2005. Mr Felix said Ri Happy reported revenue last year of R$800m, up 22 per cent from a year earlier, while margins were in the "lower teens." Brazil's toy industry offered numerous opportunities for expansion, including in the fast-developing northeast, which had much fewer stores than in the richer southeast as well as into new categories, such as baby toys. Carlyle, which is about to go public in the second quarter, entered Brazil in 2007 with its typical franchise approach of hiring local staff to establish a Carlyle branded fund. The $1bn vehicle, closed in 2009, has turned Carlyle South America Buyout Partners into one of the largest private equity groups in the country. Last year, Brazilian investment bank BTG Pactual raised the biggest pool of capital to date, a $1.5bn growth fund. Vinci Capital Partners and Patria Investimentos, part-owned by US buy-out group Blackstone, have closed similarly sized funds last year. The gush of capital flowing into these three Brazilian funds has formed the main part of the $5.25bn fundraising in the first three quarters of the past year, according to data by the Emerging Markets Private Equity Association. The capital raised in the first nine months was already exceeding the volume of any other full year.