Carrefour shares leap on Couche-Tard merger talks

PARIS (Reuters) – European retail giant Carrefour has received a surprise merger approach from Canadian convenience-store operator Alimentation Couche-Tard, sending the French company’s shares up 13% on Wednesday.

European supermarket groups have been expected to seek tie-ups to counter growing competition from online rivals such as Amazon, though Couche-Tard’s announcement that it has initiated exploratory talks with Carrefour raised analyst questions over the potential for cost or purchasing savings.

Couche-Tard, which is mainly focused on gas stations in North America, would be entering virgin territory with Carrefour. Continental Europe’s biggest retailer has operations across Europe and Brazil, including its out-of-town hypermarkets.

“Given the nature and location of ATD’s businesses, we see little scope for synergies,” Citi analysts said, adding that fierce competition makes France a particularly tough market.

It was not immediately clear whether Couche-Tard might seek to cherry-pick from Carrefour’s operation.

Couche-Tard has mainly made smaller acquisitions in the past, though it was reported to be a potential suitor for Marathon Petroleum Corp’s Speedway gas stations last year before another buyer sealed a $21 billion deal.

There is no certainty at this stage that these discussions will result in any agreement or transaction, Couche-Tard said.

Carrefour, which described the approach as “friendly”, said talks were preliminary, but the news sent its shares up 13.6% to 17.53 euros by 1113 GMT.

Bloomberg reported that Couche-Tard was discussing a bid of about 20 euros per share, which would value Carrefour at 16.2 billion euros ($19.72 billion).

OVERHAUL PLAN

The company employs more than 320,000 people worldwide, including 105,000 in France, its largest market. It is also France’s largest private sector employer. The French Presidency declined to comment on the Canadian group’s approach.

Carrefour launched a five-year overhaul plan in 2018 to cut costs and boost e-commerce investment to contend with online competitors as well as domestic rivals such as Leclerc. It has also expanded into convenience stores to reduce reliance on the big hypermarkets that still make the bulk of its sales.

“If the potential transaction was for Carrefour’s convenience stores segment only, we could better understand the strategic rationale,” Raymond James analysts said of Couche-Tard’s approach.

With food retailers across the world benefiting from surging demand as more consumers stay home during the COVID-19 pandemic, Carrefour reported robust third-quarter results in France as well as other key markets Brazil and Spain.

Chief Executive Alexandre Bompard has repeatedly said the retail sector was bound to consolidate and that his mission was to ensure Carrrefour 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 also struck a purchasing alliance with Britain’s Tesco that year and retreated from the highly competitive Chinese market, where it sold loss-making operations to electronics retailer Suning.com.

($1 = 0.8216 euros)

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