Politics breaks $ 20 billion Canadian shopping trip in Paris

Photographer: Jeremy Suyker / Bloomberg

Alimentation Couche-Tard Inc. founder Alain Bouchard hoped to save a $ 20 billion bid for Carrefour SA when it arrived at the French Ministry of Finance, whose headquarters projects over the Seine like an aircraft carrier stranded in the east of Paris.

After waiting for a brief audience with Finance Minister Bruno Le Maire, Bouchard got the message: the proposed deal was dead on arrival, torpedoed by French political opposition.

Friday’s meeting ended a tumultuous week for Couche-Tard and Carrefour. Bouchard, a self-made billionaire who transformed an obscure Canadian gas station operator into an empire of 14,200 retail outlets through acquisitions, wanted to take the next step. Buying the French grocery store would have transformed Couche-Tard into a global retail giant, alongside companies like Walmart Inc.

However, the opening it ended just four days after it was released, and the companies said they would seek a looser alliance, sending Carrefour’s shares up 7.6% less on Monday. Giving one of France’s biggest supermarket owners to foreign ownership was impossible at a time when Covid-19 roadblocks emphasized the strategic importance of the country’s food supply, said Le Maire.

Couche-Tard is not the first foreign acquirer to be thwarted by French concerns over economic sovereignty, but it underestimated the flag’s ripple reflexes that intensified amid Covid-19. With regional elections approaching later this year and a presidential vote scheduled 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 celebrated new cause to attack centrist president Emmanuel Macron.

Bad time

“It was not the time to do a deal like this,” said Fabienne Caron, an analyst at Kepler Cheuvreux. “The government had much more to lose than to win. The real reason is politics. “

The companies aggravated their miscalculation, leaving aside Le Maire and Macron. The finance minister learned of the negotiations on Tuesday night via text message from Carrefour’s chief executive, Alexandre Bompard, according to an official at the Ministry of Finance who asked not to be named, citing government rules. It was around the time that a Bloomberg News report revealed the lectures that night.

Read more: Couche-Tard faces investors complaining when Carrefour’s business fails

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

Negotiations between the two companies started in the fall, after Couche-Tard failed to buy Speedway gas station network by Marathon Petroleum Corp. Previous acquisitions have transformed Couche-Tard from a single store in a Montreal suburb to a convenience store operator that runs from Texas to Hong Kong.

Carrefour, best known for giant out-of-town stores that sell everything from baguettes to t-shirts and grass seeds, has been challenged by increased online shopping and the growth of Lidl and discount stores Aldi. Under Bompard, it reduced its hypermarkets while investing in convenience stores, e-commerce and organic foods, but stocks fell more than a third in its three and a half year term before Tuesday’s news.

Friendly Lectures

Later that night, after the leak, the two companies confirmed the discussions, emphasizing that the negotiations were friendly. The following day, Carrefour’s shares soared, with Couche-Tard confirming that it weighed a price of 20 euros per share.

In government sectors, however, opposition was growing. On Wednesday afternoon, Le Maire spoke to Bompard and also to Carrefour’s main investors, as The president of LVMH, Bernard Arnault, who holds a 5.5% stake. At the end of the day, the finance minister went on television to say he was opposed to the deal.

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

Carrefour’s consultants and some analysts saw an element of stance in Le Maire’s hard line, imagining that the finance minister would eventually give in. They had reason to believe that this business could be viewed differently from a 2005 approach by PepsiCo Inc. for 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 a promise to shake up the French economy held back by state interventionism. Couche-Tard was born in Quebec, which shares linguistic, cultural and commercial ties. And Carrefour could use a partner with a lot of money to finance its incomplete recovery.

In 2019, France led European countries in the ranking of foreign investment projects by the accounting firm EY. Its companies have also stepped up expansion abroad, with LVMH recently completing the $ 16 billion purchase of Tiffany & Co. Some French champions have recently stumbled, however – notably the pharmaceutical Sanofi, whose Covid vaccine project faces months delay after a dosing problem during testing.

Couche-Tard was ready to respond to French concerns with a commitment to inject 3 billion euros ($ 3.6 billion) into Carrefour, guaranteeing jobs and promising to maintain the retailer’s headquarters in France, as well as listing the stocks of the companies combined in the two countries.

‘Main Difficulty’

Le Maire appeared to open the door slightly at a conference on Thursday, when he described Carrefour being acquired by a foreign entity as a “major difficulty”. On Friday morning, he tried to clear up any ambiguity, declaring in a morning TV appearance that his position on the Couche-Tard approach was “not clear and definitive”.