French multinational Carrefour has received a friendly takeover attempt from Canadian convenience store company, Alimentation Couche-Tard. The potential merger approach has caused Carrefour’s shares to jump by 13% to 17.53 euros Wednesday. The deal could value the French retail company at 16.2 billion euros ($19.72 billion) at a bid of around 20 euros per share by Couche-Tard, according to Bloomberg.
Couche-Tard has over 15,000 stores across several countries including Canada and the U.S. The Canadian firm mostly focuses on gas stations and has bought out smaller companies in the past. It was supposedly looking to acquire Marathon Petroleum Corp’s Speedway gas stations last year which was later acquired by another buyer for $21 billion.
On the other hand, Carrefour is Europe’s biggest retailer and operates through hypermarkets. It employs more than 320,000 people around the world. It has over 105,000 employees in France alone – making it the country’s largest private-sector employer.
In 2018, the retail giant launched a five-year overhaul plan to reduce costs and bolster online investments to combat against online and local rivals like Leclerc. Carrefour has also pushed into convenience stores to diversify its sales and reduce its dependency on sales from hypermarkets alone. It is still unclear if Couche-Tard would want to buy out certain operations of Carrefour.
Financial Performance & Deals
Food retailers around the world have benefited from the growing demand as the covid-19 pandemic has caused people to stay at home. Carrefour has also reaped the rewards resulting in robust third-quarter results in its key markets including France, Brazil, and Spain.
Carrefour previously struck a deal with British multinational retailer Tesco in 2018. In the same year, it pulled back from the Chinese market which posed tough competition to Carrefour, selling the loss-making operations to Chinese electronic retailer Suning.com.
As the competition from online retailers like Amazon has increased during the pandemic, European supermarket chains have taken the route of merging to fight and survive against their growing rivals. However, analysts were not positive about the cost synergies that could result from the Couche-Tard’s and Carrefour’s merger.
Analysts from Raymond James also pointed out that if Couche-Tard is only aiming for Carrefour’s convenience stores segment, then it would have been easier to understand the strategic rationale behind it.