Carrefour: French policy kills Canadian candidacy to create one of the largest supermarket groups in the world

Carrefour: French policy kills Canadian candidacy to create one of the largest supermarket groups in the world

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In a joint statement on Saturday, French supermarket chain Carrefour (CRERF) and Couche-Tard (ANCTF), owner of Circle K, said negotiations on a € 16.2 billion ($ 19.5 billion) transaction “are no longer in progress”.

The companies, which confirmed merger discussions just last week, said they would instead explore partnerships in areas such as fuel purchase, distribution and private label products.

The deal would have created the fourth largest supermarket chain in the world based on 2019 sales, after Walmart (WMT), Owner of Lidl Grupo Schwarz and Kroger (KR), according to Euromonitor. Carrefour is one of the largest grocery stores in Europe, with 10,000 convenience stores, supermarkets and hypermarkets across the continent. Couche-Tard operates 9,000 convenience stores in North America and is increasing its presence in Europe. The two groups total about US $ 50 billion.

The turnaround comes after Finance Minister Bruno Le Maire told French TV BFM that the government would block the deal if pressed. He had previously expressed opposition to the transaction, a position he clarified in an interview on Friday.

“It is not polite, but clear and final,” he said. “What is at stake? It is the food security of our country, ”he added, recalling that the pandemic highlighted that“ food security is priceless ”.

France has tightened the rules that govern foreign acquisitions in recent years and, in 2020, extended the list of sectors that require government approval to include agricultural activities that contribute to national food security. Carrefour controls 20% of food distribution in France, according to Le Maire.

But electoral politics may have played a bigger role. The acquisition of France’s largest private sector employer by a foreign company would have strengthened the country’s far-right National Rally 15 months before the presidential election, said Fabienne Caron, an analyst at Kepler Cheuvreux.

The food security motive “makes little sense,” Caron wrote in a note to customers on Monday, adding that foreign-owned grocery stores, such as Lidl, operate effectively and mainly sell French products. The steps to block the deal are “all about politics,” she added. “The agreement is very close to the presidential elections and the risk of damaging the far-right party is very great.”

The pandemic also exposed how much France depends on foreign countries for vital health equipment, such as surgical masks. In that context, and given the forthcoming elections, the government “had more to lose than to gain by accepting such an offer,” she told CNN Business. “The timing was bad.”

Investors were skeptical about an agreement to combine two groups with significant differences in geography and format, causing Couche-Tard’s share price to fall by nearly 11% last week.

– Gaëlle Fournier contributed reporting.

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