No surprise that Alimentation Couche-Tard bid on Carrefour receiving political scrutiny: Analyst
Alimentation Couche-Tard Inc.’s top executives are in Paris seeking to salvage a US$20 billion bid for Carrefour SA as officials from Canada press the French government to relax its objections to the deal.
Pierre Fitzgibbon, the economy minister in Couche-Tard’s home province of Quebec, said he would speak with French Finance Minister Bruno Le Maire Friday to apply “positive pressure” in favor of the transaction. Fitzgibbon said he would stress the close-knit relationship between the province and France that has facilitated previous deals, including Alstom SA’s purchase of Bombardier Inc.’s rail unit, announced last year.
Couche-Tard “could be a very strategic shareholder that would benefit Carrefour’s operations in France,” Fitzgibbon said to reporters.
The Canadian convenience-store operator plans to pump 3 billion euros (US$3.6 billion) into the French supermarket operator over five years, according to a person familiar with the situation, as part of a set of assurances to the government of President Emmanuel Macron.
Other pledges include preserving jobs for two years, keeping Carrefour’s headquarters in France and maintaining stock listings in France as well as Canada, said the person, who asked not to be identified because the information isn’t public.
Carrefour shares gave up some of this week’s gains after Le Maire said he was prepared to give a “clear and definitive no” to a deal, falling 2.9 per cent to 16.61 euros in Paris. Couche-Tard’s offer is for 20 euros per share; both sides see room for negotiation on the final price, according to people familiar with the situation.
A Carrefour representative didn’t respond to requests for comment.
Le Maire previously cited concerns about a French supermarket chain falling into foreign hands, saying the country needs to maintain domestic control over its food supply. France recently beefed up its authority to block foreign takeovers.
“We have the legal instrument available to us,” Le Maire said Friday. “I’d rather not have to use it, but will if needed.”
The finance ministry is ready to study the proposal once the Canadian side officially presents it, people familiar with the matter said earlier this week. They said Macron’s administration plans to take as long as needed to assess its impact on jobs and the sector.
Despite Le Maire’s strident comments, Couche-Tard Chief Executive Officer Brian Hannasch and other managers are in Paris negotiating with Carrefour’s leadership in an effort to come up with a package that’s palatable to the French company’s shareholders and the government, according to a person familiar with the situation.
Couche-Tard shares were up 5.1 per cent to $38.10 as of 12:47 p.m. Toronto time. Prior to Friday’s gains, they had fallen for eight consecutive days.
In Ottawa, Prime Minister Justin Trudeau hinted that his government is prepared to throw its weight behind the company’s effort. “Our role as a government is always to be there to support Canadian companies including as they look to expand around the world. I know that discussions continue to be ongoing and I won’t make any further comments on that,” he told reporters Friday in Ottawa.
Carrefour employs around 100,000 people in France and is the country’s largest private employer, with stores ranging from convenience outlets to giant hypermarkets dotting the landscape.
The company has been implementing a turnaround plan under Chief Executive Officer Alexandre Bompard that involves investments in online shopping and organic food. Analysts point to the absence of geographical overlap between the companies.
The investment plan was reported first by Les Echos, which is owned by Bernard Arnault’s LVMH. Arnault also controls a 5.5 per cent stake in Carrefour.
If Couche-Tard goes ahead with its bid, it would need to submit its plans for screening by the Finance Ministry, which has 30 days to respond to such requests, to which it can add 45 days for a deeper examination. No reply from the government amounts to a refusal. In parallel, or before that, Couche-Tard could start informal negotiations on the commitments it’d be ready to make.
“If Carrefour’s board of directors and reference shareholders see a real strategic interest in the deal and manage to convince the Finance Ministry, the door could open,” said Pascal Bine, Paris-based partner at Skadden, Arps, Slate, Meagher & Flom LLP.
But that’s not a given in a country where riots over the availability of bread set in motion a process that toppled the monarchy in 1789, Bine added.
“Since the COVID crisis, a new paradigm has emerged, aimed at preserving the economic sovereignty of the country, including the supply of essential goods and services,” he said. “If people are not fed, it’s the Revolution.”
--With assistance from Kait Bolongaro and Derek Decloet.