Politics Block C $ 20 Billion Shopping Trip to Paris

Photographer: Jeremy Suyker / Bloomberg

Alimentation Couche-Tard Inc. founder Alain Bouchard hoped to salvage a $ 20 billion offer for Carrefour SA on its arrival at the Ministry of Finance, whose headquarters juts out on the Seine like an aircraft carrier stranded in eastern Paris.

After waiting for a brief audience with Finance Minister Bruno Le Maire, Bouchard understood: the draft agreement was dead on arrival, torpedoed by the French political opposition.

Friday’s meeting ended a tumultuous week for Couche-Tard and Carrefour. Bouchard, a self-made billionaire who had turned an obscure Canadian gas station operator into an empire of 14,200 retail locations through acquisitions, wanted to take the next step. The purchase of the French grocer would have turned Couche-Tard into a global retail giant, alongside Walmart Inc.

However, the opening ended just four days after its discovery, and the companies said they would seek a more flexible alliance instead, sending Carrefour shares up to 7.6% less on Monday. Handing over one of France’s largest supermarket owners to foreign ownership was impossible at a time when Covid-19 lockdowns underscored the strategic importance of the country’s food supply, Le Maire said.

Couche-Tard is not the first foreign buyer to be thwarted by French concerns over economic sovereignty, but it has underestimated the flag reflexes that have sharpened in the midst of the Covid-19. With regional elections looming later this year and a presidential vote slated for 2022, allowing the country’s largest private employer to fall into foreign hands could have given nationalist leader Marine Le Pen and leftist Jean-Luc Melenchon a new cause famous to attack the centrist president Emmanuel Macron.

Bad timing

“Now was not the time to make such an agreement,” said Fabienne Caron, analyst at Kepler Cheuvreux. “The government had more to lose than to gain. The real reason is politics.

Businesses have compounded their miscalculation by blinding Le Maire and Macron. The finance minister learned of the talks on Tuesday evening by text message from Carrefour CEO Alexandre Bompard, according to a finance ministry official who asked not to be named, citing government rules. This came as a Bloomberg News report revealed the talks that evening.

Read more: Couche-Tard faces grilled investors as Carrefour deal collapses

This article is based on interviews with people familiar with the discussions and the government’s position, who asked not to be identified due to the sensitivity of the topic. Representatives for Carrefour and Couche-Tard declined to comment.

Talks between the two companies began in the fall, after Couche-Tard failed in a purchase attempt Marathon Petroleum Corp. Speedway Service Station Network Previous acquisitions had allowed Couche-Tard to grow from a single store in a suburb of Montreal to a convenience store operator stretching from Texas to Hong Kong.

Carrefour, best known for its giant out-of-town stores that sell everything from chopsticks and t-shirts to grass seed, has been challenged by the rise in online shopping and the growth of Lidl discounters. and Aldi. Under Bompard, he downsized his hypermarkets while investing in convenience stores, e-commerce and organic food, but stocks had fallen by more than a third during his 3.5-year tenure before news of Tuesday does not break out.

Friendly discussions

Later that evening, after the leak, the two companies confirmed the talks, stressing that the negotiations were friendly. The next day, Carrefour’s stock surged, Couche-Tard confirming that it weighed a price of 20 euros per share.

In government quarters, however, opposition was mounting. On Wednesday afternoon, Le Maire met with Bompard as well as key Carrefour investors such as Bernard Arnault, Chairman of LVMH, which holds 5.5%. Late in the day the Minister of Finance went on television to say he was opposed to the deal.

An Arnault representative did not respond to a request for comment.

Carrefour advisers and some analysts saw an element of posture in the Mayor’s hard line, believing that the Minister of Finance would eventually give in. They had reason to believe that this deal might be viewed differently from a 2005 approach by PepsiCo Inc. with French yogurt maker Danone SA, which was blocked for reasons of sovereignty.

After all, Macron is a former Rothschild banker who took office four years ago with the wish to shake up a French economy held back by state interventionism. Couche-Tard is originally from Quebec, which shares close linguistic, cultural and commercial ties. And Carrefour could call on a partner with deep pockets to finance its incomplete recovery.

In 2019, France leads European countries in a ranking of foreign investment projects by the accounting firm EY. Its companies have also accelerated their expansion abroad, with LVMH having recently completed its $ 16 billion purchase of Tiffany & Co. Some French champions have fallen recently, however, including drugmaker Sanofi, whose Covid vaccine project is faced with a delay of several months after a dosage problem during testing.

Couche-Tard was ready to respond to French concerns by committing to inject 3 billion euros ($ 3.6 billion) into Carrefour while securing jobs and committing to maintain the retailer’s head office in France. , as well as to list the shares of the combined companies in the two countries.

“Major difficulty”

The Mayor appeared to open the door slightly at a conference Thursday when he described the acquisition of Carrefour by a foreign entity as a “major difficulty”. On Friday morning, he attempted to dispel any ambiguity, stating in a morning television appearance that his position on the Couche-Tard Approach was “unclear and final”.