October 13, 2021

Carrefour has ended negotiations over a deal with Auchan, a smaller privately held French food retailer owned by the billionaire Mulliez family, after the two sides failed to agree to terms.

Auchan was working on an offer in which it would have paid €21.50 per Carrefour share, with 70% in cash and the rest in shares of the newly enlarged group, a roughly 30% premium to the current price of Carrefour stock. Auchan, France’s fifth-largest food retailer with about 9% market share, saw the combination with the second-largest with just under 20% as a way to bulk up to face challenges from discounters such as Aldi and Lidl, while also modernising the business for the ecommerce era. 

Carrefour chief executive Alexandre Bompard, who had been piloting the talks with Auchan since spring, presented the idea to the board’s four-person strategy committee last week, but quickly ran into opposition. 

The Moulin-Houzé family, which owns department store group Galeries Lafayette and is Carrefour’s largest shareholder with a roughly 10% stake, was particularly against the deal since it did not want to be part-paid in shares and felt the combination did not make strategic sense.

It was also concerned about the long antitrust review and significant job cuts that would be required to deliver the promised synergies. 

Brazilian businessman Abilio Diniz, who owns a 7% stake in Carrefour, was also consulted, since together the two shareholders control about 37% of the voting rights in Carrefour. 

Auchan is a privately held French food retailer owned by the billionaire Mulliez family

The deal talks also foundered over the debate on the valuation to ascribe to privately held Auchan, which has been losing market share in France in recent years because of its reliance on large-format hypermarkets that have fallen out of favour with consumers. Carrefour also operates a significant number of hypermarkets in France but has managed to stabilise market share losses there.

Auchan generated about €32 billion in sales last year, half from France and the rest in 13 other countries including Russia and Poland. Carrefour’s sales in 2020 were €79bn, with half coming from France. 

Jefferies analyst James Grzinic said the mooted €21.50 per share price for Carrefour was “not even close to the right level where a change of control should be discussed. Whether this represents an end to the negotiations is unclear.” 

Carrefour and Auchan declined to comment. 

The end of the talks was first reported by French newspaper Le Figaro and Bloomberg. With Bompard entertaining the possibility of selling the company or merging with a rival reflects the pressure on Carrefour, whose shares are down almost 30% since the chief executive took over in mid-2017. 

On a forward price-to-earnings basis, Carrefour shares are valued at a roughly 20% discount to those of UK grocers such as Tesco and J Sainsbury, and a 30% discount to Dutch peer Ahold Delhaize, according to S&P Capital IQ data. 

In January, the French government blocked Carrefour from pursuing a takeover offer from Canada’s Couche-Tard that would have valued the group at €20 per share, arguing the retailer was too strategic to the country’s food system to be taken over by a foreign buyer. Bompard also briefly held talks over a combination with Casino in 2018.

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