Politically crashes $ 20 billion Canadian shopping trip to Paris

Photographer: Jeremy Suyker / Bloomberg

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

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

The Friday meeting ended 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 people like Walmart Inc.

The overture ended just four days after it came to light, and the companies said they will instead seek a looser alliance, sending Carrefour shares a whopping 7.6% lower on Monday. Ceding one of France’s largest supermarket owners to foreign ownership was impossible at a time when the Covid-19 lockdowns underscored the strategic importance of the country’s food supply, Le Maire said.

Couche-Tard isn’t the first foreign acquirer to be bothered by French concerns about economic sovereignty, but it underestimates the flag-waving reflexes sharpened during Covid-19. With regional elections looming later this year and a 2022 presidential election that would see the country’s largest private employer fall into foreign hands, nationalist leader Marine Le Pen and leftist Jean-Luc Melenchon could have given a new case to attack centrist President Emmanuel Macron.

Bad timing

“It was not the time to make such a deal,” said Fabienne Caron, analyst at Kepler Cheuvreux. “The government had a lot more to lose than to gain. The real reason is political. “

The companies made their miscalculation worse by dazzling Le Maire and Macron. The Treasury Secretary heard of the talks late Tuesday via text message from Carrefour Chief Executive Officer Alexandre Bompard, according to a Treasury Department official who asked not to be named, citing government regulations. It came about the time a Bloomberg News report revealed the talks that evening.

Read more: Couche-Tard confronts investor whims as Carrefour deal fails

This article is based on interviews with people familiar with the discussions and the cabinet position, who asked not to be identified because of the sensitivity of the case. Representatives from Carrefour and Couche-Tard declined to comment.

Talks between the two companies began in the fall, after Couche-Tard failed to purchase Marathon Petroleum Corp.’s Speedway gas station network. Through previous acquisitions, Couche-Tard had grown from a single store in suburban Montreal to a convenience store operator from Texas to Hong Kong.

Best known for giant out-of-town shops selling everything from baguettes to T-shirts to grass seed, Carrefour is being challenged by the rise of online shopping and the growth of discounters Lidl and Aldi. Under Bompard, it scaled back its hypermarkets as it invested in convenience stores, e-commerce and organic food, but shares were down more than a third from its 3 1/2 year tenure before Tuesday’s news broke.

Friendly conversations

Later that night after the leak, both companies confirmed the talks and stressed that the negotiations were friendly. The next day, Carrefour’s stock rose, with Couche-Tard confirming that it weighed a price of 20 euros per share.

However, opposition grew in government quarters. On Wednesday afternoon, Le Maire spoke to Bompard and key Carrefour investors such as LVMH Chairman Bernard Arnault, who owns a 5.5% stake. Late in the day, the Treasury Secretary said on television that he was against the deal.

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

Carrefour’s advisers and some analysts saw an element of attitude in Le Maire’s hardline, assuming that the Treasury Secretary would eventually give in. They had reason to believe that this deal could be viewed differently from a 2005 approach through PepsiCo Inc. to French yogurt maker Danone SA, which was blocked on the grounds of sovereignty.

After all, Macron is a former Rothschild banker who took office four years ago with a vow to shake up a French economy held back by state intervention. Couche-Tard is from Quebec, which has close linguistic, cultural and business ties. And Carrefour can use a deep-seated partner to fund its incomplete turnaround.

In 2019, France led European countries in a ranking of foreign investment projects by accounting firm EY. The companies have also ramped up their expansion overseas, with LVMH recently purchasing Tiffany & Co. of $ 16 billion. However, some French champions have stumbled lately – most notably drug manufacturer Sanofi, whose Covid vaccine project is delayed for months after a dosage problem during tests.

Couche-Tard was willing to respond to French concerns by pledging to pump 3 billion euros ($ 3.6 billion) into Carrefour, while guaranteeing jobs and pledging to keep the retailer’s headquarters in France, as well as the shares of the combined companies in both countries.

‘Great difficulty’

Le Maire seemed to open the door a bit at a conference Thursday when he described Carrefour being acquired by a foreign entity as a “major difficulty”. On Friday morning, he tried to dispel any ambiguity by stating in a morning TV appearance that his stance on Couche-Tard’s approach was a “clear and definitive no.”