French retail giant Carrefour has been asked by Canadian food group Couche-Tard for a “rapprochement,” the two companies said in separate press releases on Tuesday. “The discussions are very preliminary,” Carrefour said at the time.
According to a press release on Wednesday, the Canadian Couche-Tard “recently submitted to Carrefour a non-binding letter of intent for a friendly merger”, on the basis of a price of 20 euros per share, which would value the French distributor with more than 16 billion euros excluding debt.
“The terms of the transaction are still being discussed (…) but the proposed remuneration should for the most part be in cash,” said Couche-Tard, who is however cautious: “There is no certainty As to whether these discussions “will lead to an agreement or an operation.”
In an internal communication to the Carrefour group, the French distributor indicates that it “will examine the project submitted to it by Alimentation Couche-Tard”. “Several decisive conditions must be satisfied”, according to the same source, in particular the fact of “allowing an acceleration of the development of the group”, of “having meaning for all of its stakeholders, in particular the group’s employees and to be a creator of value “.
The interest of the Canadian group Couche-Tard for Carrefour surprised, but this possible “merger” would make sense, according to specialists in the sector.
No risk of cannibalization between the two groups
On the one hand, there is a champion of the “convenience store” format, small stores often backed by service stations, mainly present in North America and somewhat in Northern Europe. On the other hand, a giant of supermarkets installed in particular in France, Southern and Eastern Europe and in Brazil.
Difficult a priori to be more dissimilar than Couche-Tard, which generates a large majority of its turnover through the sale of fuels (around 70%), and Carrefour, a major food distribution company. “There is no geographic overlap and format between the two” parties, summarize analysts at Jefferies in a note Wednesday. Advantage: this avoids, a priori, any “risk of cannibalization”, said Yves Marin, expert in the distribution sector within the firm Bartle.
A merger would also not, a priori, have an impact on employment and would not pose a problem in terms of concentration or competition.
Fight against Amazon?
But the medal has a flip side: if “Couche-tard is surely betting on commercial synergies with a better network of the territory”, analyzes Clément Genelot, specialist in the distribution sector at Bryan, Garnier & Co, he is skeptical about the ” value creation “of such an operation. “We do not see synergies on the supply chain or logistics” in the case of a merger, adds Yves Marin.
For Couche-Tard, however, the operation could have the advantage of being based on a more complete geographic network, since only in Poland are the two brands present.
Couche-Tard’s weight in gasoline distribution would make it possible to consider the purchase of fuels on an international scale, but “economies of scale have proven their limits in the distribution business”.
Another factor may explain the desire to bring distributors together, according to another specialist in the sector wishing to remain anonymous: “Faced with Amazon and others, the volumes of investments in logistics and technological capacity are colossal, there is therefore an obligation to find a form of alliance, beyond purchasing synergies “.
At the initiative of the Canadian
If the two brands spoke of a “rapprochement” and a “friendly” operation at a very preliminary stage, it is the Quebec group, which celebrated its 40th anniversary in 2020, which is at the initiative.
“They have a desire for expansion and are on a logic of extensive growth”, observes Yves Marin. The group has indeed grown in this way: it established itself in the United States in the early 2000s by acquiring smaller competitors, then in Northern Europe in 2012 with the acquisition of the Norwegian group Statoil, for 2, 8 billion US dollars.
The group of more than 130,000 employees also made a remarkable entry in November on the Asian market by buying for nearly 360 million dollars the Hong Kong group Convenience Retail Asia. However, “he has never been on mergers of this size”, observes Clément Genelot.
What interest for Carrefour?
For Carrefour, such an operation “would make it possible to seek growth levers by alliance”, observes Yves Marin, and would allow the share price to be supported.
Carrefour, still internally, says it sees this approach as proof of the “merits of the transformation launched three years ago” by its CEO Alexandre Bompard, aimed at making it “the world leader in the food transition for all”, by relying in particular on the development of organic products.
At the end of October, the group, which has just bought the specialist distributor Bio C’Bon in France, communicated on a “dynamic” third quarter 2020 with sales above market expectations. But it remains less well valued on the stock market than Couche-Tard.
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