Alain Bouchard’s plane had not even landed at Paris’s Charles-de-Gaulle airport Friday morning before French Economy Minister Bruno Le Maire went on television to announce his “clear and definitive” rejection of Alimentation Couche-Tard Inc.’s bid for grocery giant Carrefour SA.
The hastily arranged trip by Couche-Tard’s founder aimed at changing the French politician’s mind turned out to have been in vain not because Carrefour’s sale would have threatened France’s “food sovereignty,” as Mr. Le Maire had claimed. Rather, Mr. Le Maire kiboshed the deal because it would have created a major political headache for President Emmanuel Macron’s government in the run-up to next year’s presidential and legislative elections.
The main union representing Carrefour employees, Force Ouvrière, had already warned that a merger between Couche-Tard and France’s largest private employer “could be disastrous for workers.” The head of France’s main farmer’s lobby, the Fédération Nationale des Syndicats d’Exploitants Agricoles, had also claimed the deal could turn Carrefour into “a hub for Canadian products, especially their beef, dairy products and canola.”
While Couche-Tard had prepared detailed arguments to counter both of those claims – including plans to invest €3-billion ($4.6-billion) in Carrefour’s operations over five years – the Quebec-based convenience store king could not overcome the realities of the French political calendar.
Mr. Le Maire, a 2017 candidate for the presidential nomination of France’s main centre-right political party, could not afford to raise the ire of France’s farmers and workers so close to an election. Despite the outwardly business-friendly demeanour of Mr. Macron’s government, takeovers have always been more politically sensitive in France than in other Western countries. And with Mr. Macron facing voters in barely 15 months, a tie-up between Carrefour and its Canadian interloper would have given ammunition to his opponents on both the left and far-right who have accused him of being the “president of the rich.”
This all made the timing of Couche-Tard’s US$20-billion bid problematic from the outset. While the plan had long been in the works, Mr. Bouchard and Couche-Tard chief executive Brian Hannasch made a strategic error in pursuing a deal just as the pandemic had raised concerns about the critical importance of securing domestic supply chains for food and other essential goods that had been outsourced in recent years.
Still, Couche-Tard may get another kick at the can after the second round of presidential vote and legislative elections in May and June next year, respectively. If he is re-elected to a second and final term, a freed-up Mr. Macron might be less likely to oppose a merger.
After announcing an end to their preliminary merger discussions, Carrefour and Couche-Tard said on Saturday that the two companies would “examine opportunities for operational partnerships,” suggesting neither company is entirely ready to throw in the towel.
Carrefour is a household name in France, and widely seen there as a global success story despite losing steam in recent years after struggling to adapt its business model amid a rapidly changing retail landscape. The chain pioneered the “hypermarket” concept in France more than two decades ago, building massive stores often surpassing 200,000 square feet in size. But an internal report leaked last year found that more than half of Carrefour’s hypermarket locations in France were operating in the red. And while the pandemic has boosted the fortunes of grocery chains, Carrefour still needs to adjust its store mix and up its game online.
Hence, even without a takeover by Couche-Tard, a company known for its relentless focus on costs and distributional efficiencies, job losses appear inevitable at Carrefour’s existing operations. One of Carrefour’s main domestic competitors in the hypermarket space, Auchan, is just emerging from restructuring that led it to shed hundreds of workers.
CEO Alexandre Bompard, who was hired to lead Carrefour in 2017 after executing a turnaround at French books and electronics chain Fnac, remains keen on a deal with Couche-Tard. Mr. Bompard was a key ally of Mr. Macron when, as economy minister in 2014, he sought to loosen Sunday shopping restrictions in the face of union opposition. French media reports describe Mr. Bompard as a member of the President’s inner circle of business contacts.
Carrefour’s largest shareholders are also said to look favourably on discussions with Couche-Tard. France’s Moulin family, which owns the legendary but troubled Galeries Lafayette department store chain, holds a 10-per-cent stake in Carrefour and two seats on the company’s board of directors. Billionaire Bernard Arnault of the LVMH luxury goods empire owns about 6 per cent of Carrefour. His 28-year-old son Alexandre Arnault, who also sits on Carrefour’s board, is connected to Canada through his Quebec-born mother, concert pianist Hélène Mercier-Arnault.
Like the rest of Carrefour’s frustrated shareholders, Mr. Arnault and the Moulin family have seen the value of their stock in the grocery giant plummet since it called off talks with Couche-Tard. They could become powerful allies if Mr. Bouchard takes another go at Carrefour in 2022.
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