Casino Says It Rejected Offer That Carrefour Denies Making

(Bloomberg) -- France’s grocery sector was thrown into tumult after Casino Guichard-Perrachon SA alleged it got approached about a merger by Carrefour SA, which denied making any proposal.

Casino, the embattled owner of Monoprix and Geant supermarkets, said just before midnight Sunday that its board held a meeting after being contacted by Carrefour about a possible combination. Four hours later, Carrefour shot back that the statement was groundless -- even as Casino stuck to its guns and detailed a meeting between company executives.

Casino shares fell as much as 3.1 percent early Monday in Paris before swinging slightly positive. Carrefour was down 0.6 percent Monday afternoon.

The unusual exchange between two publicly traded companies marks the latest bizarre twist in the saga of Casino, whose shares have plunged 29 percent this year as the retailer battles with Muddy Waters Capital LLC and other short sellers. Hedge funds have taken aim at the retailer’s complicated financing, as supermarket operators wrestle with an increasingly competitive French grocery landscape.

Minc Meeting

On Monday morning, Casino stood by its overnight announcement, with a spokesman saying Chief Executive Officer Jean-Charles Naouri met with his counterpart at Carrefour, Alexandre Bompard, on Sept. 12 for initial discussions. The meeting took place at the office of Alain Minc, a French consultant and power broker, according to people with direct knowledge of the companies who asked not to be identified.

The executives talked about a combination without specifics and instructed lawyers to look into the possibilities, according to the Casino spokesman, but the retailer’s board on Sunday afternoon decided not to pursue the matter.

A spokesman for Carrefour confirmed the meeting but said it happened at Casino’s request and that Carrefour had no plan for any sort of approach.

Minc, reached by phone, declined to comment.

‘No Sense’

A Carrefour bid for Casino “would make no sense,” said Bruno Monteyne, an analyst at Sanford C. Bernstein. The companies together sell about a third of France’s groceries and run almost three-quarters of its convenience stores, so antitrust regulators would force them to sell too many stores in France to make the deal work, he said.

Casino shares have gained 20 percent since the alleged meeting. A spokeswoman for the French market regulator declined to comment.

Carrefour lost its leading position in the French retail market last year and now sells 20.4 percent of the country’s groceries, according to Kantar Worldpanel data. Casino has an 11.6 percent share.

The current market leader is E. Leclerc, which has a 21.1 percent share.

Casino said in its statement that its board intends to take action to defend itself, and that the retailers have overlaps in France and Brazil that would pose obstacles to a combination. The company has already said it plans 1.5 billion euros ($1.8 billion) worth of asset sales in a move to cut its debt.

The grocery operator also said its stock has been “subjected to coordinated downward speculative manipulations of an unprecedented scale” in past months. Investors have bet against more than a third of Casino’s freely traded shares, according to IHS Markit data.

Casino’s debt rating was cut further into junk territory by Standard & Poor’s this month.

For its part, Carrefour said it’s focused on the implementation of its 2022 transformation plan. “The difficulties faced by Casino and its controlling shareholder may not justify untimely, misleading and groundless communications,” the retailer said.

Price Cuts

Carrefour said it’s reviewing legal options to stop the “innuendos.”

Retailers in France have been slashing prices to ward off competition from discounters. Carrefour has moved to beef up its e-commerce operations and formed an alliance with Tesco Plc to increase its leverage with suppliers.

Under Bompard, Carrefour announced a plan to expand in organic and fresher produce. It also moved to boost efficiency by cutting 2,400 jobs at its headquarters near Paris and by selling or closing some underperforming stores.

©2018 Bloomberg L.P.