French supermarket group Casino, whose shares have slumped this year due to concerns over its debt, said it has rejected a tie-up approach from domestic rival Carrefour SA, although Carrefour denied making any overtures.
French supermarkets are looking for ways to bolster profits after a protracted price war at home and are also under pressure to modernize their businesses to counter the likes of online giant Amazon.com Inc.
Casino said it was contacted by Carrefour over a possible tie-up, but there are regulatory hurdles to any such deal given the two companies’ strong positions in the French grocery sector.
In a statement, Casino said its board of directors met on Sunday and “unanimously decided to reject Carrefour’s approach.”
“The board unanimously reiterated its entire confidence in Casino’s strategy for value creation based on its unique market positioning,” Casino said. “The board of directors also acknowledged the barriers, in France and in Brazil, to a combination with Carrefour, especially in terms of competition and employment.”
However, Carrefour — which, like Casino, has a large business in Brazil — denied making an approach, saying in a statement that it was surprised Casino’s board of directors could consider “a merger proposal that does not exist.”
“The difficulties faced by Casino and its controlling shareholder [do] not justify untimely, misleading and groundless communications,” Carrefour added.
Casino and Carrefour shares fell as the stock market opened in Paris yesterday, but then recovered to trade slightly higher.
Carrefour is the world’s second-largest retailer by revenue after Walmart Inc, with a market value of about 13 billion euros (US$15.26 billion). Casino has a market capitalization of about 4 billion euros.
Ion-Marc Valahu, a fund manager at Geneva-based Clairinvest, said he did not think a tie-up is feasible.
“There would be too many regulatory issues and the two companies have different cultures,” said Valahu, whose firm owns some Casino shares.
Casino shares have slumped nearly 30 percent since the start of this year as investors fret over its debts and those of parent holding Rallye Group.
Rallye, through which chief executive Jean-Charles Naouri controls Casino, needs to repay more than 600 million euros of bonds next month and 300 million euros in March.
Last week, five banks granted Rallye a new 500 million euros credit line, while Casino has also been selling off assets to cut debts.
Carrefour shares are down nearly 10 percent in the year to date.
In January, Carrefour announced plans to cut costs and jobs, boost e-commerce investment and seek a partnership in China to lift profit and revenue.
Carrefour also struck a global purchasing alliance with Tesco PLC in July.
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