French protectionism threatens deal between Carrefour and Couche-Tard

Couche-Tard
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French Economy Minister Bruno Le Maire is already threatening to torpedo a possible takeover deal between Carrefour and Canadian Couche-Tard under the guise of "food sovereignty".

 

Minister of Economy on the barricades

The rapprochement between Carrefour and Couche-Tard is still in its infancy. But both companies have already acknowledged that 'exploratory talks' are ongoing and, for the time being, these are on an amicable basis. That last term is not so innocent. If Couche-Tard can work out a deal with Carrefour CEO Alexandre Bompard, this will increase the chances of a real takeover. If Bompard resists, Couche-Tard can still approach Carrefour shareholders directly with a hostile takeover bid, but such a scenario often drives up the takeover price with no guarantee of success.
 

But it seems Couche-Tard will have less work to do with Bompard than with the French government. The latter is always particularly irritable when a foreign buyer shows up for one of the standard-bearers of the French economy. In 1999, the French government already guided the merger between Carrefour and Promodès, fearing that the latter might fall into the hands of a foreign player like Walmart. Carrefour is a very French brand, and in Paris they would rather not see it disappear. And so, Minister of Economy Bruno Le Maire climbed on the barricades.

 

Carrefour as 'essential link’

Le Maire does not shy away from hyperbole. “Carrefour is an essential link in the food security of the French and in our food sovereignty”, he declared on television channel France 5. Other French supermarket icons such as Auchan, E. Leclerc and Système U will not be too pleased to hear this. But also: if Couche-Tard succeeds in acquiring Carrefour, the Canadians have every interest in keeping the shelves in the super- and hypermarkets well-stocked so that customers keep coming.
 

A reasoning that apparently escapes Le Maire completely, because in the same interview he went a few steps further: “The day you go to Carrefour, or even Auchan, and there is no pasta or rice left, what are you going to do?” Despite the absurdity of these statements, Couche-Tard has every interest in allaying the concerns of Le Maire quickly. Since the beginning of this year, as Minister for the Economy, he has also been responsible for 'food security' in this country, and from that position he can certainly block a possible takeover.  

 

Bernard Arnault

Le Maire realises what’s at stake. Carrefour is the largest private employer in France. That is a lot of worried employees, with their families, for whom Le Maire can now act as protector. The question is whether he will succeed. To begin with, there is major shareholder Bernard Arnault, who stepped into the capital of Carrefour in 2007, and since then has been fruitlessly trying to get some return on that investment. In 2007, the Carrefour share fluctuated around 50 euros a piece, today it is still around 15 euros. A deal with Couche-Tard therefore seems the quickest way to recoup at least part of his investment.
 

Getting political cover will not be easy for Le Maire either, now that President Emmanuel Macron has to steer his country through the corona crisis in the first place. So it is not really a good time to start a crusade against a deal between two private companies. Certainly in Macron's case that would appear to be particularly hypocritical. He has a past at merchant bank Rothschild where he made a lot of money supervising mergers and acquisitions.