In 1989, Valentim asked Diniz to take over the leadership of Pão de Açúcar. Valentim remained part of the group's board of directors. In March 1990 the Collor government implemented an economic plan which put Pão de Açúcar on the verge of bankruptcy. Diniz implemented the practice "cut, concentrate and simplify" and made cuts across the company. He sold the building which had served as the company's headquarters since 1986 in 1992. The company, which had 626 stores in 1985, was reduced to 262 stores by 1992. However, family conflicts threatened the company. In an agreement signed in November 1993, Diniz was given the majority control of Grupo Pão de Açúcar. His parents received 36.5% of the company shares and his sister, Lucília, held 12% of the company shares. Diniz led Grupo Pão de Açúcar through an IPO in 1997 and it was listed on the New York Stock Exchange. It was the first 100% national controlled company to conduct a global stock issue (in Brazil, the United States and Europe). In 1999, the French group Casino acquired 24.5% of the voting capital of the group for $854 500 million. In 2000, Diniz transitioned the company into Companhia Brasileira de Distribuição, which became one of the largest retail chains in the country.
In December 1989, Diniz was the victim of a sensational political kidnapping, followed by a police rescue. He was confined for six days in a small space under a house, with a duct leading to the kitchen fan as his only source of oxygen.
The kidnapping took place in the morning of the Brazilian presidential elections in Brazil in 1989.