Thursday, February 29, 2024

Carrefour shares pop as merger talks intensify

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Alimentation Couche-Tard Inc., Canadian owner of Circle K convenience stores, is considering takeover of French grocer crossroads SA in a roughly $ 20 billion deal that would create a transatlantic retail giant.

Couche-Tard’s initial proposal values ​​the French company at around $ 20 per share, people familiar with the matter said. That would represent a premium of around 29% over its closing price on Tuesday.

Carrefour shares rose 14% in Paris on Wednesday, trading at less than 18 euros. Couche-Tard slipped 2.2% after a Bloomberg report on the talks, valuing the company at nearly C $ 46 billion ($ 36 billion).

Couche-Tard confirmed on Tuesday that it had started “exploratory discussions” on a friendly agreement with Carrefour. There is no certainty that the talks will result in a transaction, the Quebec company said. The two sides see room for negotiation on the final price, according to people familiar with the situation.

Couche-Tard focuses on convenience stores and gas stations, not supermarkets. She has built an empire by methodically acquiring smaller rivals, first in Canada before entering the United States in 2001 and in Europe in 2012. Lately, she has focused on the regions of the United States and Asia-Pacific, where it had previously attempted to purchase Caltex Australia Ltd. vote against a revised offer during the pandemic.

crossroadsoperatesmore than 2,800 supermarkets and 703 large format hypermarkets in Europe. In Latin America it hasstoresin Argentina and Brazil.

The company, which has around 320,000 employees worldwide, is the largest private employer in France. The retailer achieves around half of its sales in the domestic market, where foreign takeovers of key companies are politically sensitive.

International offers

Couche-Tard, whostartof a single store in a Montreal suburb in 1980, has a no-frills reputation, with senior management known to visit dozens of stores before making acquisitions to spot weaknesses. He agreed in 2016 tobuyUS service station operator CST Brands Inc. for around $ 4 billion, andwona presence in Scandinavia and the Baltic region thanks to its purchase in 2012 of Statoil Fuel & Retail ASA.

Last year he was among the potential contenders competing to acquire US gas station operator Speedway, which was ultimately sold to Seven & i Holdings Co. for $ 21 billion.

Couche-Tard has a network of more than 9,000 convenience stores in North America, most of which also offer retail fuel, according to itswebsite. It also had around 2,700 locations inEuropein October of last year.

Any deal would add to the $ 182 billion in deals announced in the retail industry over the past 12 months, according to data compiled by Bloomberg. Convenience store operators have flourished in the supermarket industry, including in the UK, where TDR Capital partnered with gas station entrepreneurs behind EG Group in October toacquire a majority stakein the Asda grocery store Walmart Inc.

Cost reduction

A pioneer in the hypermarket format, Carrefour has lost ground in recent years to Leclerc SA and German discounters in France, while forays into overseas markets such as Latin America and China have produced mixed results. . Carrefour sold an 80% stake in its Chinese unit two years ago to local retailer Co. It had around 5.2 billion euros in net financial debt in June last year, up from nearly 6 billion euros a year earlier, partly due to proceeds from the agreement with China.

The yield on Carrefour bonds due 2027 rose six basis points to 0.30% at 7:52 a.m. in London. The French retailer confirmed the discussions in a statement.

Under the leadership of Alexandre Bompard, CEO, Carrefour has cut costs by slashing the company’s giant stores, which sell everything from products to clothing and housewares, while expanding into e-commerce and organic food. The company’s main investors are Bernard Arnault, the billionaire chairman of luxury giant LVMH.

France has been one of the toughest retail markets in Europe, with moderate economic growth dragging down consumer spending, while intense competition among grocers has reduced prices and margins. In 2018, Carrefour entered into a purchasing alliance with the United Kingdom Tesco Plc to increase its influence with suppliers.

Carrefour has held up fairly well during the pandemic. It posted its strongest revenue growth for at least two decades in the third quarter as an increase in the number of people working from home boosted demand for groceries.

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