Guyenne and Carrefour in talks over equity ties

French retailer Guyenne et Gascogne said on Wednesday it was in talks with Carrefour that include expanding equity ties, and that it may receive a proposal soon.

Guyenne et Gascogne Chairman Bertrand de Montesquiou said Carrefour was considering buying its largest franchisee, and paying for it with Carrefour shares.

The move, if confirmed, would be prompted by a need to secure Carrefour's relationship with Guyenne Et Gascogne as main shareholder the Beau family will be free to sell its stake later this month.

"Everything is possible. We are open to a proposal," said Montesquiou, who added that Carrefour was holding a board meeting on Wednesday.

Ongoing talks between the two retailers covered sourcing and brand contracts, their relations within their Sogara venture and "possible extension of capitalistic ties" he said.

Carrefour declined to comment.

By 0926 GMT, Guyenne et Gascogne shares were up 9.19 per cent at €88.99, valuing the company at around €600 million, having risen as much as 26 per cent in earlier trading. Carrefour shares were off 1.08 per cent.

"Our NAV (Net Asset Value) for Guyenne et Gascogne stands at 110 per share ... a decent price in our view. Given the lack of visibility on Carrefour, a bid in cash would be much better than a bid paid with Carrefour shares," CA Cheuvreux said in a note.

Carrefour, weakened by repeated profit warnings and strategy U-turns, has seen its shares lose 40 per cent this year.

"For Carrefour, the impact on earnings would be neutral until €105 per share and marginally dilutive above this level. Carrefour's financial leeway is limited, so a bid by share is more likely than an offering in cash," the CA Cheuvreux analysts added.

Founded in 1913, Guyenne et Gascogne, a food-based retail group that operates hypermarkets and supermarkets primarily in south west France and Spain, had consolidated net sales of €533m last year.

The Beau family, which owns 21.32 per cent of the capital and 33.11 per cent of the votes, has an agreement to keep its shares until December 15.

"They have two options ... Either they sell or they stay in the capital and have to change the management of the group," Le Figaro said, citing a source close to the matter.

The paper said this was because some board members, including Chairman Bertrand de Montesquiou, were near retirement age.

Montesquiou did not comment on these issues.

Carrefour and Guyenne et Gascone have an operational relationship dating back over 40 years. Together they own Sogara, which they set up in 1966 and which operates 13 Carrefour hypermarkets in south west France.

Sogara in turn owns 8.232 per cent of Centros Commerciales Carrefour, which operates 171 Carrefour hypermarkets, 108 Carrefour Market supermarkets and 28 Carrefour Express in Spain.

Under the complex structure, the parent company Guyenne et Gascogne also operates 6 Carrefour hypermarkets and 27 Carrefour Market supermarkets in France.