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French retailers to merge
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August 30, 1999: 8:27 a.m. ET
Carrefour, responding to Wal-Mart expansion, offers $16.6B for Promodès
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LONDON (CNNfn) - French supermarket operator Carrefour launched a friendly $16.6 billion bid for rival Promodès Monday, creating Europe's largest retailer with a market value of $48 billion.
The deal promises to accelerate the consolidation of a European retail sector already facing up to the threat of expansion by the world's largest retailer, Wal-Mart (WMT) of the United States.
Under terms of the friendly deal, Carrefour is offering 15.9 billion euros ($16.6 billion) for Promodès in a six-for-one stock swap. The offer represents a 20 percent premium to Promodès' closing price Friday.
The deal, which is subject to regulatory approval, would create a company with annual sales of $49.2 billion, vaulting it above Germany's Metro, the current European number one.
At Friday's close Promodès was valued at 13.3 billion euros, while Carrefour has a market value of almost 33 billion euros. Together, they will generate annual revenue of 54 billion euros this year, the companies claimed.
Carrefour Chairman Daniel Bernard will head the new company.
The companies operate more than 8,000 supermarkets and hypermarkets on three continents. Both have a strong presence outside France -- Carrefour in Asia and Latin America and Promodès in Europe, particularly Spain, Portugal and Italy.
Promodès shares jumped 17.7 percent when they opened at midday Monday after being suspended ahead of the announcement. The stock later slid back to 809 euros, a rise of 16 percent. Carrefour stock slid 2.8 percent to 136.3 euros.
French retail stocks have gyrated in recent weeks in expectation of a deal.
Both companies have substantial family shareholders, and the deal could be a defensive move given growing media speculation recently of an aggressive approach for one or both of the retailers from companies outside France.
French media reports had pinpointed likely approaches from Ahold of the Netherlands or Wal-Mart.
The ripple effect was felt throughout Europe. Spain's Alba, which owns the Pryca store chain in partnership with Carrefour, jumped 7 percent in Madrid. Pryca shares were suspended.
Metro (FMEO) shares traded up 2.3 percent at 52.60 euros, having been as high as 53.30 euros on expectation of more consolidation. The company said it was watching developments closely, but has made no secret of its plans to expand its food retail and cash-and-carry operations in Europe.
Wal-Mart is still seen as the main predatory threat in Europe. The Arkansas-based firm, which had 1998 sales of $138 billion, has boosted its presence in the food market at home and increased its presence in Europe with the $10 billion takeover of Britain's Asda (ASSD) supermarket group and two German chains, Wertkauf and Interspar.
-- from staff and wire reports
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Carrefour
Promodès
Metro
Wal - Mart
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