The Canadian group Couche-Tard wants to eat Carrefour, but the French government has said no. Mario Sassi’s in-depth analysis from his blog
Shortly after the announcement of the purchase offer for Carrefour by the Canadian group Couche-Tard for an estimated value of 16 billion euros, the French economy minister ruled “I am not in favor to this operation ”causing a heavy slide in the stock exchange which damaged the company.
In France, the famous ancient proverb that in Italy sounds “Wife and oxen of your countries” is declined in: “Prend ta femme dans ton village et les boeufs dans le voisinage” therefore, on paper, little space for intruders or suitors even if from the French-speaking territories of Quebec. The latter will certainly have taken it into account. From them, the same proverb is slightly different in form. Not in the meaning: “Marie-toi devant ta porte avec quelqu’un de ta sorte” (get married in front of your door with someone of your kind).
Despite the free trade agreement between the European Union and Canada signed in 2016, the game seems truly complex. When it comes to buying businesses in France, wives and oxen (and business ownership) have to be at home. Having the same language is not a sufficient characteristic for the French.
I do not think that the main shareholders of Carrefour are of the same opinion while not underestimating that we are talking about the largest employer in the country and the complex interests of the entire national agri-food chain.
Unlike Minister Bruno Le Maire, the management of the large-scale distribution group across the Alps has moved with greater caution. “Carrefour will examine the proposal and the project to assess whether it responds to the interests of the group, its collaborators, and whether it is a useful element to accelerate their growth”.
Carrefour today represents a “multi-format network of 12,300 points of sale, present in thirty countries with more than 320,000 collaborators”. Its 2019 turnover reached 80.7 billion euros and its market value is close to 13 billion euros.
It should not be underestimated that the two main shareholders of the group, Bernard Arnault and the Moulin family, have been hoping to leave the company for years and therefore for them this purchase proposal from Canadians represents an opportunity. Bernard Arnoux owns approximately 6% of the group. He is the real reference and it is he who proposed the CEO of Carrefour Alexandre Bompard in 2017.
The Moulin family owns 12%, but it is much more fragile in the current French economic context. The Galeries Lafayette are in crisis of results and soon a heavy restructuring plan will be launched which foresees the elimination of jobs. The offer from Canadians also comes for them at the right time.
If the operation were to go through, the new reality would be placed in fourth place in the world ranking, behind Walmart, Costco and Amazon. According to French industry expert Clement Genelot, Couche-Tard is used to dealing with acquisitions but has never done mergers of this size. The French trade union CFDT, for its part, through the national delegate Thierry Babot wondered if we are facing a financial operation or a serious long-term project. On the other hand, there do not seem to be any logistical or supply chain synergies.
Today the Canadian company has a turnover of around 54 billion dollars and, on the Toronto stock exchange, has a capitalization of around 30 billion. According to the statements published, we are faced with a non-binding letter of intent that provides for a “friendly” approach based on a price of 20 euros per share. So with a group valuation above the theoretical 16 billion euros. Among other things, it does not even seem that the Canadian company is willing to launch a takeover bid without an agreement with the French. Obviously the terms are still all to be discussed. Therefore, outlets other than merger are not ruled out.
Couche-Tard is clearly smaller than Carrefour but certainly more profitable: 2 billion net income against 1.2 billion of Carrefour. Founded in 1980 in Laval, a suburb of Montreal Couche-Tard, it has developed through numerous acquisitions. The group has 9300 stores in the USA (Circle K) with approximately 100,000 employees. It is present in Latin America and Asia. In Europe, it has around 2,700 stores in Scandinavia, the Baltic countries, Poland, Ireland and Russia. Hence the interest in the French market and not only where it is not present.
Here is a name that says little or nothing. In fact, it prefers a proximity format, a mini market with a limited number of products. Open late and, in general, it is part of the service stations (a kind of Autogrill sui generis). Just remember that over 70% of their Quebec sales are fuel.
The executives of Couche-Tard are in Paris these days so the discussion is open. Rothschild represents the Canadian company, Lazard the French multinational. The proposal, although all to be verified, is one that does not leave neither the shareholders nor the managers indifferent. I would not underestimate it …
The opposition of the Politics is undoubtedly strong, I would say Pavlovian, typical of the Franco-French vision and destined to hold up only if it manages to offer an alternative shared by the shareholders of the group. Let’s not forget the weight of Iper for Carrefour and their complex reconversion underway which is working but far from being considered complete. The objective remains, for the French multinational as for all the other global and national players, to keep up with the strategies of the various national competitors and network giants by strengthening.
This operation demonstrates what I have always claimed. To grow and generate the resources to compete and innovate, it is first of all necessary to focus. Or you remain confined to your own organizational and economic dimensions. And this is a central problem for the entire large-scale retail trade. Not just in France. Carrefour is in the midst of its restructuring plan launched in 2018 which is working and which foresees a strong cost reduction accompanied by an important technological development, a new positioning of the offer and a renewed quality of service. At the same time it is committed to reducing its dependence on large formats and developing in proximity.
The results achieved will be sufficient to convince shareholders to forgo this or other offers that may come in the future
Probably instead of being surprised and opposing these operations, the Policy should learn to accompany them so that the consequences and inevitable side effects on work and on the supply chain are manageable. This is the real point. Not just for the French.
