(BN) Casino Investors Unimpressed by Carrefour Deal Talk: Street

“Casino is better off alone and has the tools to take its debt levels down,"Ion-Marc Valahu, the co-founder of Geneva-based Clairinvest and a Casino investor, wrote in an emailed response to questions. “There is no way the French government
would let a merger happen, given the amount of store closures and layoffs this would entail.”

By Albertina Torsoli

(Bloomberg) — Investors in Casino Guichard-Perrachon SA were unmoved on Monday by the French supermarket operator’s
announcement that it had rejected a takeover approach from rival Carrefour SA, which denied making an offer in the first place. A tie-up is unlikely ever to happen as it would raise antitrust and other political concerns, according to analysts.
Casino shares fell as much as 3.2 percent and were 0.6 percent lower as of 12 p.m. in Paris. The stock of its debt-laden parent company Rallye SA was down 3.4 percent. While Casino has rebounded this month, the owner of the Monoprix and Franprix banners has lost 30 percent of its value this year amid attacks by short sellers and investors’ mounting concerns about
its complex group structure and high debt levels.
“Casino is better off alone and has the tools to take its debt levels down,"Ion-Marc Valahu, the co-founder of Geneva-based Clairinvest and a Casino investor, wrote in an emailed response to questions. “There is no way the French government
would let a merger happen, given the amount of store closures and layoffs this would entail.”
Here is what analysts are saying about a possible Casino and Carrefour tie-up.

Kepler Cheuvreux, Fabienne Caron

* “Carrefour denies having made an offer but not having met Casino,” Caron writes, saying it’s likely that respective CEOs
Alexandre Bompard and Jean-Charles Naouri talked
* This doesn’t mean discussions would have led to an offer or a merger, given antitrust issues that would emerge in France and
Brazil
* Short interest on Casino remains very high, and given the stock’s volatility, it was in Casino’s interest to issue a press
release: it’s a way to show to markets that “its assets are attractive and undervalued”
* Kepler has a buy recommendation on Casino shares and a hold on Carrefour

Sanford C. Bernstein, Bruno Monteyne

* A Carrefour-Casino merger would ”make no sense” as it would lead to “much value destruction,” with the 2 retailers’ combined dominance in France and Brazil prompting forced disposals
* Bernstein has a sell recommendation on Casino and a market- perform recommendation on Carrefour

Societe Generale, Arnaud Joly

* A merger could prove very challenging, given both companies’ extensive geographic footprint, complex portfolios and potential competition issues in both France and Brazil
** In Brazil, a merger between Casino’s GPA and Carrefour Brazil could lead to dominant market positions in the Rio and Sao Paulo markets
* Should the tie-up happen, it would probably have an impact similar to that of the Sainsbury-Asda merger in the U.K., with
pricing likely tougher to come by in Europe
* The impact would be smaller on food giants such as Unilever, Nestle and Danone and higher on smaller suppliers that have less bargaining power
* SocGen has a buy recommendation on both Casino and Carrefour

Bloomberg Intelligence, Charles Allen

* Casino’s stringent rejection of a Carrefour bid that was never made suggests the company may be open to corporate activity, in
our view
* Domestic and international buying alliances are helping to build the French retailer’s scale, yet greater integration could
be needed to reduce costs and improve profitability

–With assistance from Joe Easton and Lisa Pham.

To contact the reporter on this story:
Albertina Torsoli in Geneva at atorsoli@bloomberg.net
To contact the editors responsible for this story:
Celeste Perri at cperri@bloomberg.net
Tom Lavell