French Retailer Carrefour Denies Takeover Talks With Rival Casino -- 4th Update
September 24 2018 - 5:02AM
Dow Jones News
By Nick Kostov
Casino Guichard-Perrachon SA, also known as Casino Group, said
late Sunday its board had rejected entreaties from Carrefour SA
about a possible combination that would merge two of France's
best-known retail giants.
But Carrefour, one of the world's biggest grocery chains, denied
soliciting Casino, accusing the rival of "untimely, misleading and
groundless communications."
Casino's release said Carrefour had approached the company in
recent days with its proposal, and that the Casino board met on
Sunday to consider the idea. "Casino thus intends to take all
necessary action to defend the group's corporate interest, and its
structural integrity, a key factor for the success of its
strategy," the company said.
In a separate news release, sent hours later, Carrefour denied
having solicited Casino, and was "surprised that Casino's board of
directors would have been submitted a merger proposal that does not
exist." A spokesman for Carrefour declined to comment beyond their
statement.
Both Casino and Carrefour have struggled to boost margins in
their cutthroat domestic market where online shopping, discounters
and meal-delivery services are all eating into once reliable profit
margins. Both also have lately been investing heavily in their
e-commerce offerings to ward off mounting competition from
Amazon.com Inc. and other rivals.
A Casino-Carrefour merger would face regulatory issues in both
Brazil and France, analysts at Jefferies said in a note Monday.
Together, the two companies would have a market share of more than
50% of modern retail in Brazil, which excludes small local
convenience stores. In France that proportion would rise to almost
a third, according to the U.S. bank.
"We await further clarifications before concluding how these
extraordinary events have come to be," the note said.
Last summer, Carrefour named Alexandre Bompard as chief
executive, tapping someone who had gone toe-to-toe with Amazon.com
Inc. when he was at the helm of book, music and electronics
retailer Fnac Darty to help close its e-commerce gap. Mr. Bompard
announced a five-year growth strategy in January that included a
pledge to invest EUR2.8 billion ($3.28 billion) in digital commerce
by 2022, and a target of EUR5 billion in sales in food e-commerce
in five years -- a sixfold increase over last year.
Casino's share price has fallen 29% since the beginning of 2018,
in part because of investor concerns about the company's debt.
Casino also has been a target of hedge funds who have shorted the
stock. Earlier this month, Casino's debt rating was cut further
into junk territory by ratings firm Standard & Poor's, who
cited the drop in share price and the widening of credit spreads at
both Casino and its holding company Rallye.
On Sunday, Casino "acknowledged the barriers, in France and in
Brazil, to a combination with Carrefour, especially in terms of
competition and employment."
"We stand by every word and every comma of our press release," a
spokesman for Casino said. "There was a meeting between the two
CEOs on the morning of September 12 at 8:30 a.m. in Paris. Both
sides then hired lawyers to advise them and they also talked."
Casino, which reported net sales of EUR37.8bn in 2017, is a
household name in France and owns the GPA brand in Brazil, which
counts over 100,000 employees and a network of over 1,100 stores.
The company, with a market value of EUR4 billion, was founded in
1898 by Geoffroy Guichard. Mr. Naouri initially bought a minority
stake alongside the founding family, and then converted it to a
majority stake in 1998.
During the following years, he took small stakes in struggling
companies. But all the acquisitions left Casino heavily in debt.
Casino launched a deleveraging plan worth about EUR4 billion in
2016, which included selling its stake in a Thai supermarket as
well as Vietnam retail assets, following an attack from short
seller Carson Block. His research firm Muddy Waters alleged Casino
used accounting gimmicks and financial engineering to hide a
sharply declining core business, which the company has denied.
Write to Nick Kostov at Nick.Kostov@wsj.com
(END) Dow Jones Newswires
September 24, 2018 04:47 ET (08:47 GMT)
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