Auchan’s $19b Carrefour discussion stalls on terms

Bloomberg

French grocer Auchan made a recent approach to acquire rival Carrefour SA for about $19 billion but talks to create the country’s market leader stalled over the terms, according to people familiar with the matter.
Auchan had approached Carrefour about a combination that would have seen Auchan, which is owned by the Mulliez family, hold a majority stake in the combined entity, the people said. The talks took place amid a flurry of dealmaking activity in the European supermarket sector.
However, the discussions were halted over disagreements among shareholders in both companies on the valuation and structure of a deal, said the people, who asked not to be identified because discussions are private.
Privately held Auchan proposed a deal that would have valued Carrefour at about 21 euros per share, or about 16.6 billion euros ($19.2 billion), said the people. Carrefour management and key shareholders viewed the range of 20 euros to 21.25 euros as too low, they said. The complex structure of a cash-and-share transaction also proved a stumbling block, they said.
It’s unclear whether discussions will be revived, the people said. Representatives for Auchan and Carrefour declined to comment. Speculation has been ripe about consolidation among French grocers, who face cutthroat pricing and competition from low-cost German rivals. Carrefour held talks with Auchan earlier this year about a possible tie-up, Le Monde reported.
The Mulliez family told a local newspaper earlier this month that they “will never sell Auchan,” somewhat dampening speculation. However, the current talks foresee the company as the buyer, not the seller, in any deal with Carrefour, the people said.
The prospect of a tie-up has had varied responses from analysts. A combination would increase exposure to giant hypermarkets as well as create a larger presence in complex markets such as Russia, It could also face antitrust or political hurdles.
Carrefour CEO Alexandre Bompard has been struggling to prop up the grocer’s share price even though analysts say a turnaround of the company’s troubled domestic hypermarkets is starting to bear fruit. He has tried to revive the chain by increasing its range of higher-margin organic food and boosting its online offerings.
Auchan has been losing market share for years in France due to its strong exposure to hypermarkets, but cost-cutting has allowed it to mitigate the fallout.