Alimentation Couche-Tard Inc. founder Alain Bouchard hoped to salvage a $20 billion offer for Carrefour SA when he arrived at the French Finance Ministry, whose headquarters juts out over the Seine like a beached aircraft carrier in eastern Paris.
After being kept 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.
The meeting Friday capped a tumultuous week for Couche-Tard and Carrefour. Bouchard, a self-made billionaire who had transformed an obscure Canadian gas-station operator into an empire of 14,200 retail sites through acquisitions, wanted to take the next step. Buying the French grocer would have turned Couche-Tard into a global retail giant, alongside the likes of Walmart Inc.
However, the overture ended only four days after it came to light, and the companies said they’ll seek a looser alliance instead, sending Carrefour shares as much as 7.6% lower on Monday. Ceding one of France’s biggest supermarket owners to foreign ownership was impossible at a time when Covid-19 lockdowns underlined the strategic importance of the country’s food supply, Le Maire said.
A Couche-Tard convenience store in Montreal, Canada. Buying the French grocer Carrefour would have turned Couche-Tard into a global retail giant.
Photographer: Christinne Muschi/Bloomberg
Couche-Tard is not the first foreign acquirer to be stymied by French concerns about economic sovereignty, but it underestimated flag-waving reflexes that have sharpened amid Covid-19. With regional elections looming later this year and a presidential vote set for 2022, allowing the country’s biggest private employer to fall into foreign hands could have given nationalist leader Marine Le Pen and leftist Jean-Luc Melenchon a new cause celebre to attack centrist President Emmanuel Macron.
Bad Timing
“It wasn’t the moment to do a deal like that,” 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 compounded their miscalculation by blindsiding Le Maire and Macron. The finance minister found out about the talks late Tuesday via a text message from Carrefour Chief Executive Officer Alexandre Bompard, according to a Finance Ministry official who asked not to be named, citing government rules. It came around the time a Bloomberg News report revealed the talks that evening.
Read more: Couche-Tard Faces Investor Grilling as Carrefour Deal Fails
This article is based on interviews with people familiar with the discussions and the government’s position, who asked not to be identified because of the sensitivity of the matter. Representatives for Carrefour and Couche-Tard declined to comment.
Alexandre Bompard
Photographer: Christophe Morin/Bloomberg
Talks between the two companies began in the autumn, after Couche-Tard failed in an effort to buy Marathon Petroleum Corp.’s Speedway gas station network. Previous acquisitions had built up Couche-Tard from a single store in a Montreal suburb into an operator of convenience outlets spanning from Texas to Hong Kong.
Carrefour, best-known for giant, out-of-town stores that sell everything from baguettes to T-shirts to grass seed, has been challenged by the rise of online shopping and the growth of discounters Lidl and Aldi. Under Bompard, it has scaled back its hypermarkets while investing in convenience stores, e-commerce and organic food, but the shares had fallen by more than one-third over his 3 1/2-year tenure before Tuesday’s news broke.
Friendly Talks
Later that evening after the leak, both companies confirmed the discussions, emphasizing that the negotiations were friendly. The next day, Carrefour’s stock surged, with Couche-Tard confirming it was weighing a price of 20 euros per share.
In government quarters, however, opposition was welling up. On Wednesday afternoon, Le Maire spoke with Bompard as well as key Carrefour investors such as LVMH Chairman Bernard Arnault, who holds a 5.5% stake. Late in the day, the finance minister went on television to say he opposed the deal.
A representative for Arnault did not respond to a request for comment.
Bernard Arnault
Photographer: Marlene Awaad/Bloomberg
Carrefour’s advisers and some analysts saw an element of posturing in Le Maire’s hard line, figuring the finance minister would eventually yield. They had reason to believe that this deal might be seen differently from a 2005 approach by PepsiCo Inc. to French yogurt maker Danone SA, which was blocked on grounds of sovereignty.
After all, Macron is a former Rothschild banker who entered office four years ago with a vow to shake up a French economy held back by state interventionism. Couche-Tard hails from Quebec, which shares close linguistic, cultural and business ties. And Carrefour could use a deep-pocketed partner to finance its incomplete turnaround.
In 2019, France led European countries in a ranking of foreign investment projects by accounting firm EY. Its companies have also stepped up overseas expansion, with LVMH recently completing its $16 billion purchase of Tiffany & Co. Some French champions have stumbled of late, however -- notably drugmaker Sanofi, whose Covid vaccine project faces a months-long delay after a dosing problem during tests.
Couche-Tard was ready to respond to French concerns with commitments to pump 3 billion euros ($3.6 billion) into Carrefour while guaranteeing jobs and pledging to maintain the retailer’s headquarters in France, as well as listing the combined companies’ shares in both countries.
‘Major Difficulty’
Le Maire appeared to open the door slightly at a conference Thursday when he described Carrefour being acquired by a foreign entity as a “major difficulty.” By Friday morning, he attempted to clear up any ambiguity, declaring in a morning TV appearance that his position on the Couche-Tard approach was a “clear and definitive no.”
On the other side of the Atlantic, the strident French reaction left little room or time for behind-the-scenes lobbying. The effort was led by Quebec, which deepened its economic ties with France last year, when Bombardier Inc. agreed to sell its rail unit to Alstom SA. The province also owns 25% of the A220, the former Bombardier jet project now controlled by Airbus SE, headquartered in Toulouse, France. That’s a relationship the French-speaking province expected to go both ways.
Quebec Economy Minister Pierre Fitzgibbon first reached out for information to Roland Lescure, a former top official at Quebec’s pension fund who, in his current job as head of the French National Assembly’s economic affairs committee, has regular contacts with Macron’s and Le Maire’s teams. Fitzgibbon also spoke to Bouchard on Thursday evening before the Couche-Tard chairman flew to France, and was about to go on a call with Le Maire when he briefed journalists on Friday morning, Canadian time.
Pierre Fitzgibbon
Photographer: Valerian Mazataud/Bloomberg
The economy minister said he understood concerns about food security, a recurring topic at home, too. In speaking with Le Maire, he intended to promote Couche-Tard’s track record, and to tout the links between France and Quebec, he said. He struck a hopeful tone.
“The dust has to settle a bit,” Fitzgibbon said. “Nothing’s going to get decided in the next 24 hours.”
He was proven wrong a few hours later.
Ministry Visit
Bouchard’s visit to the French Finance Ministry was the second of the day by Couche-Tard officials, some of whom had spent part of the week in Paris. Earlier Friday, CEO Brian Hannasch met with Le Maire’s chief of staff, Bertrand Dumont.
Between both meetings, the Canadians huddled with their bankers and advisers at Rothschild & Co.’s headquarters on Paris’s elegant Avenue de Messine. Bouchard and Bompard strategized that day, working on the best arguments to win over the government, a person familiar with the men’s day said.
Their efforts were fruitless, as the finance minister made it clear in the hastily arranged meeting that his opposition was unconditional.
With any hope for a deal dashed, Couche-Tard and Carrefour say they’re focusing on the proposed alliance. The companies will consider how to work together on fuel purchases, branding and distribution where their networks overlap.
The Canadians had to return home empty-handed, but things could change after the dust settles on the 2022 election campaign, said Clement Genelot, an analyst at Bryan, Garnier & Co.
“Ongoing discussions surrounding operational collaboration leave the door open to restart merger talks in the future,” he said.
— With assistance by Manuel Baigorri
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