Alimentation Couche-Tard offers $ 20 billion for Carrefour

Alimentation Couche-Tard at night in Montreal, QC. Photo: Patrick Le Barbenchon/Wikimedia Commons/Creative Commons Attribution-Share Alike 3.0 Unported
Canadian giant Alimentation Couche-Tard has made a bid for French giant Carrefour. The french finance minster is highly skeptical of the idea of foreign ownership of the grocery chain. Photo: Patrick Le Barbenchon/Wikimedia Commons/Creative Commons Attribution-Share Alike 3.0 Unported
By Reidar Molthe

15 January 2021 16:25

Alimentation Couche-Tard offers $ 20 billion for Carrefour

The owner of the Circle K petrol station chain, Canadian Alimentation Couche-Tard, is offering $ 20 billion for the world's second largest grocery chain - French Carrefour SA. That is about 30 percent above current capitalized values in Carrefour.

Alimentation Couche-Tard Inc

Alimentation Couche-Tard Inc. focuses on the convenience store industry. The Company focuses on the sale of goods for immediate consumption, road transportation fuel and other products through stores and franchise operations. It operates its convenience store chain under several banners, including Circle K, Corner Store, Couche-Tard, Holiday, Ingo, Mac’s, Re.Store and Topaz. It operates and licenses approximately 12,575 convenience stores across North America, Ireland, Norway, Sweden, Denmark, Poland, and the Baltics.

This Thursday France chose to show a tough line against any takeover of retailer Carrefour by a foreign company, dealing a major blow to a near $ 20 billion bid approach by Canada’s Couche-Tard. French Finance Minister Bruno Le Maire tells Reuters that the government wants to preserve the country’s food security and sovereignty.

“Having Carrefour being bought by a foreign company would be a major difficulty for all of us,” finance minister Le Maire says in an interview with Reuters.

“Food security is at the core of the strategic challenges of all developed nations,” he claims.

Friendly talks

Carrefour SA

Carrefour SA is a France-based retail distribution group, which operates through four geographical segments: France, Rest of Europe, Latin America and Asia. The Group operates more than 12,000 stores and e-commerce sites in more than 30 countries across the globe. Its stores come in a variety of formats and channels, such as hypermarkets, supermarkets, convenience stores, cash & carry stores, hyper cash stores, drive and e-commerce. Its product offering includes a wide range of local fresh produce, meats prepared on site, fresh fish, as well as bakery products, consumer goods and nonfood products. Additionally, the Group offers complementary services, including package pick-up points, key copying, vehicle hire, pharmacies and health/beauty care, fuel oil delivery, financial and insurance services, together with leisure services, such as travel agencies, tickets for shows and photo services, among others.

“Carrefour has been approached, in a friendly manner, by the Alimentation Couche-Tard group. Discussions are very preliminary,” Carrefour states in a short press release.

In a surprise move, Quebec-based Couche-Tard said on Wednesday that it had submitted a non-binding 20 billion euros for French grocery group, largely in cash.

The shares in the French giant increased by 17 percent on the news, correspondingly the values in Couche-Tard fell by almost 12 percent.

Couche-Tard gave no further detail on its vision for the combined companies.

Facing growing competition from online rivals such as Amazon, European supermarket operators are viewed as ripe for tie-ups, though Couche-Tard’s approach raised analyst questions about the potential for cost cuts or purchasing savings.

Food security and employment

As France seeks to preserve independence in food access, food retail was recently added to a list of sectors considered as strategic important by the French government, which gives the government the authority to review and block any deals. The minister also cited jobs as a key consideration as Carrefour is a major employer and says he is not in favor of a takeover by a foreign company.

Carrefour employs 105,000 workers in France, its largest market, making it France's largest private sector employer. Worldwide it has more than 320,000 staff. The French president, Macron, declined to comment on the Canadian group’s approach.

Couche-Tard (ATD), which is mainly focused on gas stations in North America, will be entering new territory if they take over Carrefour. Carrefour, continental Europe's largest retailer, has operations across Europe and Brazil, including out-of-town hypermarkets.

The negative stock market reactions are not very optimistic on behalf of Couche Tards plan. –

“Given the nature and location of ATD’s businesses, we see little scope for synergies”, Citi analysts say, adding that fierce competition makes France a particularly tough market.

There is no certainty at this stage that the discussions with Carrefour will result in any agreement or transaction, Couche-Tard argues.

Five-year plan

Carrefour launched a five-year overhaul plan in 2018 to cut costs and boost e-commerce investment to contend with online competitors as well as domestic rivals such as Leclerc. It has also expanded into convenience stores to reduce reliance on the big hypermarkets that still account for the bulk of its sales.

With food retailers across the world benefiting from surging demand as more consumers stay home during the COVID-19 pandemic, Carrefour reported robust third-quarter results in France as well as other key markets Brazil and Spain, very similar to “all” food retailers in mature markets.

Chief Executive Alexandre Bompard in Carrefour has repeatedly said the retail sector was bound to consolidate and that his mission was to ensure Carrefour emerges as a winner. In 2018 Carrefour struck a purchasing alliance with Britain’s Tesco and retreated from the highly competitive Chinese market, where it sold its loss-making operations.

Sources: Reuters, Carrefour, Alimentation Couche-Tard, Bloomberg.

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