French big-box retailer Auchan couldn’t quite make a good enough offer to buy peer Carrefour SA when it tried a takeover last year. Now buyout firms may be on hand to juice up the bid. Securing a deal would involve the buyers making compromises. A willingness to do so suggests some desperation to get a transaction done.
Auchan and Carrefour are both struggling to retain customers as shoppers move online, to convenience stores and to German discounters Aldi and Lidl. A tie-up would provide some respite, since together these titans would have considerable buying power in the French market. They could also cut marketing and head office expenses. As U.K. peer Tesco Plc likes to say: Every little helps.
The central obstacle is figuring out how to structure a marriage. First time around, Auchan proposed paying around 17 billion euros ($19 billion) for the equity, reportedly 12 billion euros in cash and the rest in its unlisted shares. Not only was the price too low, but the value of the stock component was dubious given Auchan isn’t publicly traded.
That leaves pulling in outside money. Auchan has had talks to team up with buyout firms including CVC Capital Partners, Bloomberg News reported this week. It’s now rekindling a deal. The price could be around 23.50 euros a share paid entirely in cash, or 19 billion euros, according to Les Echos. Based on what Auchan could afford to pay in cash last year, this implies its consortium partners would provide some 7 billion euros, analysts at Bryan Garnier point out.
Read more/Source: The Washington Post
