Carrefour makes bid for French franchisee

Carrefour, the world's second-largest retailer, said on Monday it was offering at least €494 million cash to buy Guyenne et Gascogne in a bid to secure its relationship with its largest French franchisee.

The supervisory board of Guyenne et Gascogne (G&G) has approved the proposed transaction, which includes an option to be paid in Carrefour shares, and a majority of G&G shareholders have agreed to tender t heir shares, the two companies said in separate statements.

Carrefour may fund part of the offer with €153m in cash it will receive from the just announced sale of its 50 per cent stake in Altis, a venture between Carrefour and Spain's Eroski.

Shareholders representing about 57 per cent of Guyenne et Gascogne have agreed to tender their shares. About half of them would do so under the secondary option, which calls for 3.90 Carrefour shares for one G&G share.

The two sides said last week that discussions were under way for Carrefour to buy Guyenne et Gascogne as key shareholder the Beau family looks to sell out and the retailer seeks to boost its position in its home market.

The Beau family and First Eagle investment Management have agreed, subject to certain conditions, to a 12-month lock up on the Carref o ur shares they will receive under the offer of €74.25 per Guyenne et Gascogne share.

Adding an interim dividend of €7 per share that Guyenne et Gascogne intends to pay before the closing of the offer, the cash bid would be "in line" with the monthly average price of Guyenne et Gascogne shares before speculation boosted the stock earlier this month, a Carrefour spokesman said.

Guyenne et Gascogne has said that any agreed deal would exclude the impact on its shares from press reports last week about a potential Carrefour takeover.

Guyenne et Gascogne shares were suspended on Monday ahead of the statement. They closed at €87.60 on Friday.

Carrefour shares closed down 3.73 per cent at €17.83 on Monday, underperforming their European sector, which was down 1 per cent.

In view of its limited leeway and a 40 per cent plunge in its share price following repeated profit warnings and strategy U-turns, analysts had said Carrefour may have difficulty engineering an all-cash or an all-share transaction.

However, one analyst had said that Guyenne et Gascogne would be worth around €660m, based on an estimated takeover price of around €100 a share.

Analysts have said that an acquisition of Guyenne et Gascogne was unlikely to create additional synergies for Carrefour and its timing was far from ideal for the French retailer, which is facing many challenges in its core domestic market.

But reaching a deal is of strategic importance to Carrefour as it can hardly afford to lose its main franchisee to a rival.

Carrefour earns some 40 per cent of its revenue in France, where it has faced tough competition from Leclerc, Casino and Auchan supermarkets.

Founded in 1913, Guyenne et Gascogne had consolidated net sales of €533m last year and gross sales of €604m.

Carrefour and Guyenne et Gascone have a relationship dating back over 40 years, which they renewed in 2008.

Together they own Sogara, which they set up in 1966 and which operates 13 Carrefour hypermarkets in south west France. Sogara in turn owns 8.2 per cent of Centros Commerciales Carrefour, which operates 171 Carrefour hypermarkets, 108 Carrefour Market supermarkets and 28 Carrefour Express stores in Spain.

Guyenne et Gascogne itself also operates 6 Carrefour hypermarkets and 27 Carrefour Market supermarkets in France.