What if… Carrefour and Casino were to merge?

Even though talks between the two retailers were dropped last year, according to analysts from Barclays, a tie-up between Carrefour and its French competitor Casino would not be unthinkable, especially because of the ongoing difficulties at Casino.

Obstacle

It is significant that Carrefour leader Alexandre Bompard called for further consolidation in the food retail sector earlier, according to analysts in a recent report. A combination of the two companies would become market leaders in France and Brazil, delivering significant synergies. The report targets savings of between 0.7 and 1.1 per cent of the potential merger group’s turnover, or around EUR 1 billion – which would increase operating profit by 30 per cent. This is a lower estimate than in the case of Ahold Delhaize, where the synergy generated 750 million euro or 1.2 percent of sales.
 

However, the main obstacle to an acquisition lies in competition issues, with the recently aborted merger attempt between Sainsbury and ASDA in mind. A merged Carrefour-Casino group would have more than 30 percent market share in France and even more than 50 percent in Brazil. The French competition watchdog would undoubtedly require a significant number of stores to be sold, but is not necessarily opposed to large mergers, as evidenced by the merger of Fnac and Darty in 2016. The fact that such a merger could prevent Casino from disintegrating, resulting in significant job losses, is an argument. In Brazil, Carrefour already attempted to acquire Casino in 2011, which may indicate that antitrust issues are not insurmountable.

Assets

The question is, can such a merger succeed? Major mergers in the past have had only limited success – just think of the Carrefour-Promodes combination in France, which never kept its promises. But according to Barclays, the current management of Carrefour does have some assets: after all, it was Alexandre Bompard who managed the merger between Fnac and Darty. And the same top executive now seems to be getting Carrefour back on track.
 

Whether the shareholders of Casino can count on an interesting premium, however, is doubtful. The majority shareholder of Casino is in a weak negotiating position due to the financial problems and the high level of debt of the group. There are few potential takeover candidates for Casino as a whole anyway.