Corner Store Owner Couche-Tard in Merger Talks With Europe's Carrefour
By Noemie Bisserbe and Saabira Chaudhuri
PARIS -- French retailer Carrefour SA and Canada's Alimentation
Couche-Tard Inc. said they are discussing a potential tie up that
could create a $53 billion grocery and convenience store giant, as
large retailers come under pressure to transform their
bricks-and-mortar footprint amid pandemic restrictions on shopping
and disruption from tech giants.
A merger would forge one of the world's largest retailers, while
combining two companies with very different formats and
geographical footprints. Retailers are in a rush to find new ways
to get food to customers ordering online as the spread of Covid-19
has massively accelerated online grocery shopping, including
Carrefour -- which opened its first store in 1960 -- is one of
Europe's largest grocery retailers. It also operates hypermarkets
and supermarkets in Asia and Latin America. The 31-year-old
Couche-Tard is the largest independent convenience store operator
in North America, operating under brands such as the Corner Store,
Circle K and Holiday. It also operates a network of gas stations in
Europe and has stores there and elsewhere in the world.
Carrefour shares were up 15% at 17.76 euros, equivalent to
$21.68, in midday trading in Paris on Wednesday, giving the company
a market capitalization of EUR14.7 billion. Couche-Tard shares
closed down 2.2% at 41.31 Canadian dollars, equivalent to $32.50,
on Tuesday in Toronto, valuing the company at around C$46.1
Jefferies analyst James Grzinic said he was a little blindsided
by the talks, saying it was hard to map out synergies because
overlap between the retailers is virtually nonexistent. He
described the talks as a major departure from Couche-Tard's stated
strategy of maintaining return on capital employed at above
Carrefour announced the talks in the early hours of Wednesday,
saying Couche-Tard approached the company. Couche-Tard said there
was "no certainty at this stage that these exploratory discussions
will result in any agreement."
If the companies merge, Couche-Tard would have the controlling
hand, analysts say. Citigroup said it wouldn't expect Carrefour to
relinquish its independence for less than EUR20 a share, equating
to a market value of around EUR16 billion.
The grocery store landscape has seen a string of large deals
over the past few years as companies look to compete with
Amazon.com Inc. and increasing online investments by traditional
Many grocers have also struggled with being squeezed in the
middle as discounters such as Aldi, Lidl and Walmart Inc. and
upscale chains such as Amazon's Whole Foods chain have done well.
Throughout the Covid-19 pandemic, most grocers have benefited as
consumers hunker down to cook and eat at home.
The sector's latest deal involves Walmart, which is currently
awaiting regulatory approval to sell a majority stake in British
grocery chain Asda Group Ltd. for $8.8 billion to a private
investment group that also owns a business running thousands of
convenience stores in gas stations. That deal isn't looking to
merge the two businesses, but is expected to see Asda open
convenience stores in gas stations.
A similar path could be followed in the event of a deal between
Couche-Tard and Carrefour, according to one person familiar with
The lack of overlap between the companies is, however, a
positive in terms of gaining regulatory approval for any deal.
Walmart initially tried to sell its Asda stake to another U.K.
grocer, but the deal collapsed in 2019 after Britain's regulator
blocked it saying it could lead to higher prices for consumers.
Analysts raised concerns the French government -- which has a
history of blocking foreign takeovers of French firms -- could be
hostile to an acquisition of Carrefour. Carrefour is one of the
nation's largest employers with about 105,000 employees in France.
The group employs more than 321,000 people world-wide and owns
12,225 stores in more than 30 countries.
It has been working to cut costs and invest in building up its
e-commerce offerings in recent years, under the leadership of
Alexandre Bompard, who became chief executive in 2017. The strategy
has held it in good stead through the pandemic. Carrefour posted
its best performance in at least two decades in the third quarter
Couche-Tard's approach showed that "at the current share price,
Carrefour is cheap and that the turnaround story is moving in the
right direction," analysts at French bank Société Générale
--Ben Dummett contributed to this article.
Write to Noemie Bisserbe at firstname.lastname@example.org and Saabira
Chaudhuri at email@example.com
(END) Dow Jones Newswires
January 13, 2021 09:27 ET (14:27 GMT)
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