Couche-Tard Wants to Buy French Grocery Chain

But the Canada-based Circle K owner faces numerous challenges.

January 15, 2021

LAVAL, Que.—Convenience-store giant Alimentation Couche-Tard is offering $20 billion for the France-based grocery chain Carrefour SA, reports

The purchase price is 20 euros (US$24.31) a share, a roughly 29% premium to its closing price Tuesday. Details are still under discussion, but payment is expected to be largely in cash, according to Couche-Tard. However, the Canadian retailer faces several challenges, including France’s sometimes frosty response to takeovers of its blue-chip companies.

Carrefour is the largest private employer in France with 320,00 workers, and the COVID-19 pandemic makes this potentially sensitive because concern over jobs has been thrust to the top of the political agenda. Shares of Carrefour rose 16% in Paris on Wednesday, trading around the offer price. Couche-Tard fell 10% in early Toronto trading.

Analysts wonder if the deal will go through or if it even makes strategic sense. Although the Canadian retail giant would give Carrefour a well-heeled partner for a much-needed restructuring, “we are a little blindsided,” said James Grzinic, a Jefferies analyst. “The format and geographic overlap between the two is virtually non-existent.”

Carrefour’s weak share price makes it an attractive target, but Couche-Tard faces several hurdles. Carrefour generates about half its sales from France, where foreign takeovers have in the past been blocked by the government. France is also one of Europe’s most competitive food retail markets, dominated by closely held players with fewer constraints than listed companies.

A pioneer of the hypermarket format, Carrefour lost ground to discounters in recent years.

Couche-Tard has built an empire by methodically acquiring smaller rivals, first at home in Canada before entering the U.S. in 2001 and Europe in 2012. With a potential Carrefour purchase, Couche-Tard, would get more than 2,800 supermarkets in Europe and 703 larger-format hypermarkets.

Carrefour tried to move into other regions, with forays into Latin America and China, but with mixed results. Two years ago, Carrefour sold an 80% stake in its China unit to a local retailer. The company had about 5.2 billion euros in net financial debt as of June last year, down from almost six billion euros a year earlier, partly due to proceeds from the China deal.

In November 2020, Couche-Tard struck a HK$2.79 billion (US$360 million) deal with Convenience Retail Asia Ltd. to acquire subsidiary Circle K HK, which operates a network of 340 company-operated convenience stores in Hong Kong and 33 franchised sites in Macau, NACS Daily reported.

Couche-Tard has a no-frills reputation. Top management visits scores of outlets to spot the weaknesses before making acquisitions. Last year, it was among potential suitors competing to acquire U.S. gas station operator Speedway, which was eventually sold to Seven & i Holdings Co. for $21 billion. Currently, Couche-Tard has a network of more than 9,000 convenience stores in North America, most of which also offer fuel, according to its website. It also had about 2,700 locations in Europe as of October last year.