France vetos $ 20 billion Canadian Carrefour offer with ‘clear and definitive no’

PARIS (Reuters) – France nearly killed off a possible $ 20 billion acquisition of Carrefour by Canadian Alimentation Couche-Tard on Friday, saying it would oppose any deal to ensure the safety of its food sector.

The French government’s intervention, with ministers turning down the offer less than 24 hours after the talks were confirmed, has raised concern in some business circles, as the industry had not previously been seen as a “crown jewel” .

Some politicians and bankers have said the pushback could tarnish the pro-business image of French President Emmanuel Macron, while others pointed out that the COVID-19 crisis has forced more than one country to redefine their national strategic interests.

“Food security is strategic for our country, which is why we don’t sell a large French retailer,” Finance Minister Bruno Le Maire told BFM TV.

“My answer is extremely clear: we are not in favor of the agreement. The no is polite but it is a clear and definitive no. “

Carrefour, who acknowledged Couche-Tard’s approach to discussing a combination on Wednesday, had no immediate comment.

The quick French slap came as a surprise even inside the retailer given what the preliminary talks were like, a source familiar with the matter said, while people close to Couche-Tard said the Canadian group was also surprised by the fact. rhetoric.

The deal seemed increasingly likely to fail, several people close to the talks told Reuters, though discussions about a potential takeover were still ongoing.

Quebec Minister of Economy Pierre Fitzgibbon told reporters he would speak to the French finance minister as the province embarks on a charm offensive to promote the deal.

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The COVID-19 pandemic brought supermarkets into the global spotlight as they worked to keep customers fed and stocked with basic necessities like toilet paper.

But with just under 20% of the French food market held by Carrefour, behind local rivals like Leclerc, even some labor representatives have questioned whether the group was inherently strategic.

“It seems a bit of a weak subject … we are not the number one food retailer,” said Michel Enguelz, who represents employees of Carrefour’s hypermarket at the French union FO.

Enguelz said he was more concerned about the job. With around 105,000 French employees, Carrefour is the country’s largest private employer and a buyer could take a more drastic stance towards its underperforming out-of-town hypermarkets.

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Pascal Dupeyrat, a French lobbyist specializing in corporate acquisitions in Relians, also said jobs would likely be Macron’s big concern in less than two years. from a presidential election.

France has long been a combative protector of his interests, a mantle also assumed by Macron, a former investment banker, when he came to power in 2017.

The president pushed to renegotiate the terms of a Franco-Italian maritime deal soon after his election, though as economy minister he also oversaw the sale of companies like telecommunications group Alcatel, which resulted in job cuts. working under the new owner Nokia.

The relapse of Carrefour could further confuse his record, despite efforts to woo international funds with “Choose France” summits and a push for reform.

“If you take such a broad view of the sectors that you consider strategic, you start creating a problem for foreign investors who need visibility,” said Olivier Marleix, member of the French parliament. from the right-wing opposition party, Les Republicains.

Marleix, who oversaw a parliamentary investigation that questioned the sale of some French companies like Alstom Energy to foreign buyers, said the move was inconsistent when deals in other sectors had moved forward.

Medef’s French economic lobby said the government condemned the deal too hastily, before giving Couche-Tard a chance to offer guarantees.

“Our foreign operations regularly buy companies overseas, so Paris must not take an overly protectionist stance that could prevent such deals. from it’s happening, “Medef said.

Alstom of France recently signed an agreement to acquire the railway operations of Canadian rival Bombardier Inc.

Couche-Tard’s acquisition of Carrefour has not yet fully convinced investors and analysts, who have questioned the lack of geographic overlap between the North American gas station operator and continental Europe’s largest retailer. .

This raised doubts about the potential for cost savings. Couche-Tard was ready to offer job guarantees and commit between € 2 and € 3 billion in investments over five years, a source familiar with the matter said.

Carrefour shares fell roughly 4% in French afternoon trading, with Couche-Tard up roughly 1% in Canada.

Reportage by Dominique Vidalon, Benoit Van Overstraeten, Michel Rose, Elizabeth Pineau, Gwenaelle Barzic and Sarah White in Paris, Pamela Barbaglia in London, Allison Lampert in Montreal and David Ljunggren in Ottawa; Editing by Jason Neely, Pravin Char and Alexander Smith