By Dominique Vidalon
PARIS -Carrefour and Auchan have ended talks over a possible partnership, the second time this year Carrefour boss Alexandre Bompard’s plans to create a Gallic supermarket powerhouse have been frustrated.
The potential deal to create a retailer with combined sales of 110 billion euros per year and a French market share of nearly 30%, had looked too complex in terms of valuation and structure, a source close to the matter told Reuters.
A second source familiar with the talks said Auchan had offered Carrefour 21.50 euros per share, or 16.8 billion euros ($19.4 billion), comprised of 70% in cash and 30% in shares of the combined company.
That’s more than 30% above Carrefour’s share price last week. But Carrefour ended the talks after its top shareholder, the Moulin family, opposed the deal – mainly on valuation grounds, the source added.
A person close to the Moulin family, however, told Reuters the family had opposed the tie-up because it “lacked industrial rationale” and could raise competition issues as well as threaten jobs in France.
In January, Canada’s Alimentation Couche-Tard dropped a 16.2 billion euro bid for Carrefour after the French government opposed the deal, citing food security concerns.
This left Carrefour without the extra firepower to galvanise a turnaround plan Chairman and CEO Bompard was reappointed in May to lead for another three years.
The extra resources offered by Couche-Tard would have boosted Carrefour’s e-commerce roll-out, a priority as it looks to retain an edge over Amazon on the groceries front.
The discussions with Auchan, which started in the spring, reviewed various scenarios ranging from equity tie-ups to asset swaps and technological partnerships, the first source said.
It was unclear if there was potential for talks to be revived. The second source said Auchan, owned by the Mulliez family, did not plan to make a hostile move for Carrefour.
Analysts have expressed concern that an Auchan-Carrefour merger would increase exposure to the struggling hypermarket store format. Some, however, have said a deal could generate cost savings and buying synergies.
Bompard has repeatedly said the retail sector is bound to consolidate and his mission is to ensure Carrefour emerges as a winner.
In 2018, Carrefour and French rival Casino were locked in a dispute after Casino said it had rejected a tie-up approach that Carrefour denied making.
Carrefour said in June it had also started considering possible tie-ups and divestments for its foreign subsidiaries, but that it had not made a decision to sell any assets.
Carrefour shares were 1.4% lower at 15.8 euros as of 1110 GMT.
“We think there is potential for further offers from Auchan or at least strategic assets disposals,” Bernstein analysts said in a note.
($1 = 0.8648 euros)