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How Couche-Tard’s ambitious bid for France’s Carrefour was cut down

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Every January at the glittering Palace of Versailles, President Emmanuel Macron hosts a conference called “Choose France” to convince the heads of big multinationals that there is no better country to invest in.

Yet when one of Canada’s biggest companies, Alimentation Couche-Tard, made such a choice last week with a €16.2bn bid for French supermarket chain Carrefour, the government moved decisively to extinguish the chance of a deal.

Just 24 hours after the companies revealed they were in talks, French finance minister Bruno Le Maire declared his opposition, calling Carrefour “a key link in the chain that ensures the food security of the French people”. With its grip on a deal slipping, Couche-Tard, a $33bn group which operates convenience stores and petrol stations in North America and Europe, scrambled.

Alain Bouchard, its billionaire founder and chairman, flew into Paris for a meeting to persuade Mr Le Maire that the company would be a good owner for Carrefour, while Canadian politicians, including Quebec’s economy minister, worked the phones. 

It was to no avail. The 72-year-old entrepreneur was sent packing back to Laval, Québec where he founded Couche-Tard, best known for its Circle K chain, in 1980. Late on Saturday, the companies admitted the talks were off, but insisted they would examine operational partnerships.

The shortlived drama riveted the French business elite, while briefly holding out the promise of a payday for some of the top investment banks and law firms in Paris. Couche-Tard was advised by Rothschild, where Mr Macron worked from 2008 to 2010. Rival Lazard advised Carrefour.

The saga has also reignited a debate over whether France is as open for business as Mr Macron once promised. By branding a Couche-Tard takeover as a risk to France’s “food sovereignty”, some executives and bankers are worried the government has done lasting damage to its ability to attract foreign investors.

Breakdown of the retail groups: Carrefour vs Couche-Tard

“How can you tell me France is investor friendly and go and do something like this?” said one person involved in the deal. “Protectionism may be politically popular but it is bad for the country in the long run.”

A far-fetched plan

Despite a reputation for protectionism, it is relatively rare for France to block a foreign takeover. In recent years, steelmaker Arcelor, telecom gear specialist Alcatel-Lucent, cement giant Lafarge, and energy group Technip were all snapped up by buyers from outside France. The country was Europe’s top destination for foreign direct investment in 2019, according to a study by EY.

One longtime ally of Mr Macron and adviser to many French companies said the failure of Couche-Tard’s gambit owed more to bad timing than any fundamental change of approach in the Elysée. France was still attractive for investors, the person argued, pointing to labour reforms and tax cuts passed by Mr Macron’s government. 

Alain Bouchard, Couche-Tard’s billionaire founder and chairman
Alain Bouchard, Couche-Tard founder and chairman, flew into Paris for a meeting to persuade the French finance minister that the group would be a good owner for Carrefour © Canadian Press/Shutterstock

“The idea that the government would stand by while the biggest private employer in France was sold to a foreign buyer in the middle of a pandemic and one year before a presidential election is simply far-fetched,” the person said.

“Carrefour is a very visible asset in France — everyone from the labour unions to the farmers who supply their milk, cheese, and meats would have been up in arms,” they added.

Anticipating such concerns, Couche-Tard had planned to allay them by pitching the deal as a way to forge a French-speaking global retailing powerhouse better armed to compete with Amazon. It pledged to invest €3bn over five years, not cut jobs for two years, and to maintain dual listings in Toronto and Paris, according to people close to the group.

Given how foreign takeovers can quickly turn political in France, companies sometimes quietly run deals by officials to gauge their reaction. In 2005, PepsiCo was rumoured to be weighing up a bid for yoghurt maker Danone, prompting the then Prime Minister Dominique de Villepin to vow to protect the company in the name of “economic patriotism”. A bid never materialised.

Column chart of Revenues (€bn) showing Couche-Tard and Carrefour sales

Months later, France passed a decree giving the government the ability potentially to block takeovers by foreign buyers in sectors deemed strategic, such as defence and security. It is a definition that has steadily broadened to include energy, water and telecoms. In 2019, “food security” was added, creating the legal tool that would eventually thwart Couche-Tard.

Pascal Bine, an M&A specialist at law firm Skadden, Arps, Slate, Meagher & Flom, said the Covid-19 crisis had made the government more willing to block takeovers that could threaten the country’s supply chains. In December, it rejected US group Teledyne’s bid to buy Photonis, a maker of night vision goggles for military use.

Couche-Tard is best known for its Circle K brand
Couche-Tard is best known for its Circle K brand © Chris Helgren/Reuters

“With the health crisis, there is a new doctrine emerging on foreign investment in France. More attention is being paid to ensure that France has supplies of key goods like medical equipment and food, and the proposed Carrefour deal does raise questions about sovereignty,” Mr Bine said.

“Legally nothing has changed but culturally something has . . . do not forget that the 1789 revolution started in part over bread shortages,” he added.

With the pandemic’s disruption hitting share prices, other countries have also been uneasy about potential foreign takeovers. The UK in November expanded its ability to review takeovers of any size in 17 key sectors, while the EU has sought similar new powers and voiced concerns over state-backed Chinese buyers.

Carrefour’s unwanted discount

If the French government could not stomach the Couche-Tard deal, Carrefour’s board and management were open to considering it.

Instead, Carrefour’s chief executive Alexandre Bompard will have to keep cutting costs to improve profits, while trying to stem a multiyear decline in sales at its large-format stores, known in France as hypermarkets. The company’s shares were down 6 per cent on Monday.

Line chart of Forward 12m price-earnings multiple (x) showing Carrefour trades at a discount to peers

Three years into a five-year turnround plan, Mr Bompard has earned credit for selling assets in China and expanding the group’s ecommerce business. But with most cost savings going to pay for restructuring, margins have barely budged.

Carrefour stock has long traded at a discount to those of other big food retailers like Tesco or Walmart, reflecting the intense competition in France, where it still earns half its sales. With a 20 per cent market share, it is the second-largest player in France behind privately owned E Leclerc.

Fabienne Caron, analyst at Kepler Cheuvreux, said that closing the valuation gap will be that much harder now that a foreign takeover is off the table and regulators have previously frowned on domestic consolidation. “The key lessons of this week is that no foreign company can buy a French food retailer, and that Carrefour is up for sale,” she said. 

The lessons have not been lost on Carrefour’s three largest shareholders, who together control about 23 per cent of the stock. The group includes France’s richest man, LVMH founder Bernard Arnault, and the Moulin family behind department store group Galeries Lafayette.

They were open to selling their stakes to help the Couche-Tard deal, according to people familiar with the matter.

They were displeased with the government’s intervention, said one person familiar with their thinking, especially because they have long supported Mr Macron. Spokespeople for Mr Arnault and the Moulin family declined to comment.

Although painful, Couche-Tard’s French snub is unlikely to dent its ambitions. Under Mr Bouchard, the group has completed almost 40 takeovers over the past decade in the fragmented convenience store sector. The relentless dealmaking had, by 2019, made it Canada’s largest publicly traded company by revenue. 

Carrefour chief executive Alexandre Bompard
Carrefour chief Alexandre Bompard has earned credit for selling assets in China and expanding the ecommerce business, but most of the cost savings have gone towards paying for restructuring © Christophe Morin/Bloomberg

Couche-Tard’s move for Carrefour was aimed at cutting its heavy reliance on petrol sales, which are expected to decline in the coming decades as electric vehicles become widespread.

A solid balance sheet certainly gives the company the license to go shopping. According to Barclays analysts, the group’s net debt-to-ebitda ratio for 2020 was 0.9 times and is projected to be 0.5 times this year.

Stephen Groff, a portfolio manager at Cambridge Global Asset Management which owns Couche-Tard shares, said the group’s record has earned it the right to hunt for a major deal — even if the approach for Carrefour came as a big surprise.

“They’re a very effective operator with a decentralised mindset that’s enabled them to adapt to very different market conditions around the world,” he said.

But “shareholders are likely to want to get further clarity on what their long-term ambitions are given this is a different path than what many may have expected.”

Additional reporting by Kaye Wiggins in London



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Gastronomes look beyond pandemic to a revolution in French fine-dining

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Chef Yannick Alléno used to serve a €395 menu featuring langoustines and foie gras at his three-starred Michelin restaurant near the Champs-Elysées.

But as France prepares to allow restaurants to reopen for outdoor service next week after six months of closure, he will instead be serving up burgers at his wine bar for a fraction of the price. 

That a superstar chef such as Alléno, whose stable of high-end restaurants from Courchevel to Marrakesh hold more than a dozen Michelin stars, is changing strategy underscores the difficulties facing France’s grands restaurants as they seek to recover from the ravages of the coronavirus pandemic

“We have to inspire people to come here by sparking their curiosity,” he said of the Pavillon Ledoyen, the neoclassical building that houses several of his restaurants, including the three-starred Alléno Paris.

Such temples to French gastronomy have long catered to wealthy foreign tourists, who will happily pay more than €1,000 for a meal for two as long as they experience l’art de vivre à la française. But with international travel severely curtailed by the pandemic, such customers are not expected back for some time. 

Chef Yannick Alléno
Yannick Alléno operates high-end restaurants from Paris to Courchevel and Marrakesh that hold a dozen Michelin stars combined © Francois Durand/Getty

Attracting locals is the new challenge, as well as retaining employees, many of whom have left the sector and its notoriously challenging working conditions. Many restaurants are also saddled with large debts after taking state-guaranteed loans to ride out the crisis.

“I have three years of struggle ahead,” said Alléno, adding that half the group’s €4m in cash reserves had been spent. “For three-star restaurants, there will be many casualties.” 

His flagship restaurant used to generate more than three-quarters of revenue from foreign diners, mostly from Asia and the US. As there is little point reopening without them, the doors will remain shut until September. Alléno will for now experiment in the less-formal location as he plots an overhaul that seeks to drag fine-dining into the 21st century.

“Everything must change,” he said, quoting the title of the book he co-wrote during lockdown. In it, he called for a revamp of everything from the style of service (warmer, more personalised) to staffing (more flexible and family-friendly).

French haute gastronomie traces its roots back to visionary 19th-century chefs such as Auguste Escoffier and Marie-Antoine Carême, who created a cuisine based on rich sauces and meticulous — often theatrical — service. For decades it was considered the world’s best and became a key part of French identity.

But its popularity has faded in recent decades thanks to competition first from the flashiness of molecular gastronomy and then the pared-back Nordic style. As French haute cuisine lost ground, it became much more expensive, putting it out of the reach of many.

“The pandemic has exposed that the business model of high-end restaurants in France simply doesn’t function without tourists,” said Joerg Zipprick, co-founder of La Liste group, which ranks the world’s best restaurants.

“This is a relatively new development. It used to be that . . . a local doctor or manager would come to these places to celebrate a special occasion. No longer.”

Zipprick said that for the top chefs, many of whom had spent the past year experimenting with takeouts and meal kits, success depended on their willingness to adapt.

A customer picks up his order from Baieta in Paris
Baieta restaurant in Paris. Many top chefs have experimented with takeouts and meal kits during the past year © Franck Fife/Getty

Diners would not want fussy and experimental dishes on their return, he predicted, but would instead want to eat good food at a nice restaurant in the company of friends and family.

“No more technical stuff or food that requires a long explanation from the waiter about the fermentation process. People don’t want their meal to be a work of art,” Zipprick said.

The last time French cuisine reinvented itself was in the 1970s when chefs such as Paul Bocuse and the Troisgros brothers created nouvelle cuisine. The movement, less opulent and calorific than the fine-dining that preceded it, put fresh and high-quality ingredients to the fore and service became less formal. 

Alléno believes top restaurants must aim to tailor experiences by talking to clients beforehand about the occasion for their dinner, the guests and their tastes.

This “concierge service” approach would allow menus to be better planned, improving the customer experience and the economics for the restaurant.

“If I know I only have three people who’ll eat langoustine on a given night then I don’t need to order six kilos just in case,” he said. “It really changes things for the kitchen.” 

Others are being even more radical. Daniel Humm’s three-starred Eleven Madison Park in New York will no longer serve meat and seafood when it reopens next month, as the Swiss chef seeks to show that sustainable and environmentally conscious eating can be compatible with luxury.

However, Éric Fréchon, the three-Michelin-starred chef behind restaurant Epicure at the five-star Le Bristol Paris hotel, played down expectations of radical change.

“Things will return much as they were before,” Fréchon said, noting that the hotel’s restaurants had a significant local client base. “People have missed the experience of haute gastronomie for so long they’ll be eager to come back.”

Fréchon said he would retain some coronavirus-era innovations, including the €1,390 “gastronomy and to bed” package that is marketed as a one-night staycation for locals that includes dinner in their suite or hotel room.

“For New Year’s Eve we had 60 servers running back and forth to rooms, it was really difficult,” he said. “But it allowed us to reach new clients who perhaps would not have dared to come to a three-star restaurant. Now we have to keep them.”

Additional reporting by Domitille Alain in Paris



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Ireland’s healthcare system taken down by cyber attack

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Ireland has shut down most of the major IT systems running its national healthcare service, leaving doctors unable to access patient records and people unsure of whether they should show up for appointments, following a “very sophisticated” cyber attack.

Paul Reid, chief executive of Ireland’s Health Service Executive, told a morning radio show that the decision to shut down the systems was a “precautionary” measure after a cyber attack that impacted national and local systems “involved in all of our core services”.

Some elements of the Irish health service remain operational, such as clinical systems and its Covid-19 vaccination programme, which is powered by separate infrastructure. Covid tests already booked are also going ahead.

However the system for processing referrals from GPs and of close contacts is down, the HSE tweeted, adding that those in need of testing should go to walk-in centres which would prioritise symptomatic cases.

“This is having a severe impact on our health and social care services today, but individual services and hospital groups are impacted in different ways. Emergency services continue, as does the @AmbulanceNAS [National Ambulance Service],” health minister Stephen Donnelly wrote on Twitter.

No group has yet claimed responsibility for the attack. Speaking on Friday morning, Reid said the HSE had also not yet been served with a ransom demand. “We are at the very early stages of fully understanding the threat, the impact and trying to contain it,” he said, adding that it was receiving assistance from the Irish police force, defence forces and third-party cyber support teams.

The master of Dublin’s Rotunda Maternity Hospital said it was advising patients who were less than 36 weeks pregnant not to present for appointments on Friday. In a statement, Cork University Hospital said patients should present for outpatient appointments, chemotherapy and surgery “unless you are contacted to cancel”, but that X-ray and radiotherapy appointments for Friday were cancelled.

Professor Donal O’Shea, consultant endocrinologist at St Vincent’s Hospital in Dublin, told RTE radio that there could be implications for patient care. “Clinical systems haven’t been targeted, but if you can’t access your computer, then getting results is impossible . . . so before long, there are going to be clinical implications,” he said. In its statement, Cork University Hospital said “only emergency bloods” would be processed at this time.

Reid said that patients nationally “should still come forward until they hear something different” and that an update should be available later on Friday. A spokeswoman for the HSE was unable to provide a further update on patient care by mid-morning. “We apologise for the inconvenience to the public and will give further information as it becomes available,” she added.

Healthcare workers told the FT they were told to turn off their laptops, leaving staff at home offline and those working in hospitals reverting to pen and paper to manage patients’ information.

In a statement on its website, Ireland’s child and family agency Tusla said that its emails, internal systems and portal for child protection referrals was also offline because it was hosted by the HSE’s network.

The attack comes as actions by cyber criminals to disrupt public services have increased during the pandemic. Earlier this month, hackers believed to be from eastern Europe breached the IT systems of the Colonial Pipeline, a major fuel conduit that supplies much of the eastern US.

“Opportunistic cyber attackers targeting flooded healthcare organisations has been a common theme throughout the course of the pandemic,” said Charlie Smith, consulting solutions engineer at Barracuda Networks. “These scammers are aware of the huge significance of health services’ IT systems at this time, and so will stop at nothing to disrupt said systems or steal valuable data in exchange for ransom.”





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Watchdog turns on Polish government over coronavirus election

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Poland’s supreme audit office has accused prime minister Mateusz Morawiecki of exceeding his powers, as it unveiled a highly critical report into the government’s attempt to hold last year’s presidential election by post because of the pandemic.

The salvo by the supreme audit office (NIK) is the latest in a series of disputes over last year’s election, which was meant to be held in May, but was eventually postponed until June as coronavirus swept through Europe.

It is also the latest in a series of clashes between the ruling Law and Justice party and Marian Banaś, a former finance minister who was put in charge of the NIK in 2019 thanks to the support of politicians from the ruling camp, but has since become a thorn in the government’s side.

Representatives of NIK, which is responsible for auditing government spending, on Thursday said the attempt to hold the presidential election by post in May — which was ultimately abandoned after disagreements in the ruling camp — had cost at least 76m zloty ($20.2m).

They also said that there had been no legal basis for the prime minister to give any orders to two state-controlled entities, the Polish Post and the Polish Security Printing Works (PWPW), in relation to holding the election, such as the printing of voting cards.

“The only body entitled to organise elections was the State Election Commission,” Banaś said during a press conference. “Organising the elections on the basis of an administrative decision should not have happened and was without legal basis.”

He said the NIK had informed prosecutors of possible crimes committed by the boards of the Polish Post and PWPW, which were involved in the preparations for the postal ballot.

The Polish Post said “categorically” that “all its actions taken to implement the prime minister’s decision of April 16 2020 were founded on legal provisions”. PWPW said it considered NIK’s move “unjustified” and “baseless”.

Banaś added that the NIK was analysing whether to notify prosecutors of concerns relating to the actions of other parties involved in the preparations for the election.

The government said that “all decisions on beginning technical preparations for postal voting in the presidential elections were in accordance with the law”.

“All the actions [of the prime minister and the head of the chancellery of the prime minister] were aimed at holding elections by the constitutional deadline,” the government’s information office said in a statement.

“The prime minister never called for presidential elections or for postal voting. The goal of the actions taken was to allow the participation in the elections of those who were entitled to vote, but whose life and health were at risk as a result of the pandemic.”

Jacek Sasin, minister for state assets, took a similar line, and told Polish state radio that the NIK report was “a certain element in the fight between the government and . . . Marian Banaś”.

Banaś has been under pressure to step down from his post since media reports emerged alleging that a building he owns was used as a brothel. In an interview with Politico, he dismissed the allegations as a “smear campaign” aimed at ousting him.

He concluded his press conference by drawing attention to the fact that the NIK was one of a series of institutions targeted by fake bomb threats earlier this week, and to an email sent to the NIK this morning falsely claiming that Banaś’s son was going to commit suicide.

“I ask you yourselves for a comment on this,” he said to the assembled journalists.



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