Marriage between Carrefour and Auchan in the pipeline?

Carrefour is desperately looking for a mate. CEO Alexandre Bompard is said to be exploring different consolidation scenarios, including one with competitor Auchan. Together, they would become market leaders.

Potential market leadership

After the failure with the Canadians, Alexandre Bompard, Carrefour group’s CEO, is looking for other potential candidates. Bompard believes that the French retail market is too fragmented and that consolidation is necessary to gain strength. Therefore, he already held talks with industry peer Groupe Casino in 2018. That is what the French newspaper Le Monde reports.

This spring, the top executive entered into talks with the Mulliez family, owner of Auchan. A merger with the northern French chain of hypermarkets could significantly change the game and make Carrefour the number one on the French market, ahead of current market leader Leclerc. After all, Carrefour has a market share of 19 per cent in France, Auchan 8.9 per cent and Leclerc about 21 per cent.

It is unclear whether the talks are still ongoing at this time. Some sources of Le Monde claimed that the negotiations already came to a halt before the summer, while an investment banker believes that the talks are still in progress. The companies themselves refrain from commenting.

Not a good match?

Barclays analysts already made clear that they do not think the merger is a good idea. The disadvantages would not outweigh the advantages for Carrefour. Together, they would indeed become the undisputed market leader. However, the most important benefit would be substantial purchasing and cost synergies. The two groups overlap not only in France but also in Spain, Poland, Romania and Taiwan.

However, the chances of the two being allowed to merge just like that by the antitrust authorities seem very small. Monopoly situations would arise in some cities. Also, it does not seem reasonable to merge with another hypermarket player, the retail concept that consumers have been turning away from in recent years. It is no coincidence that Auchan has been losing market share for at least three years in a row, while Carrefour, according to analysts, is on the right track.

And it remains to be seen whether the Mulliez family is ready to hand over the reins. Especially since the founder, Gerard Mulliez (aged 90), is still around and the group is not in financial difficulties. The family has also previously criticised the short-term vision of listed companies, of which Carrefour is one. Not much chance of success, if you ask Barclays.