Vandevelde Exits Carrefour As Private Equity Moves in
By John Lichfield
The future of the French supermarket colossus Carrefour was plunged into uncertainty yesterday after a Californian private- equity company and France’s wealthiest man joined forces to acquire almost 10 per cent of its shares.
At the same time, Luc Vandevelde, the former boss of Marks & Spencer, resigned as chairman of Carrefour, reportedly after differences with the Halley family, the largest shareholder, over an attempted buyout bid for the chain.
The acquisition of 9.8 per cent of Carrefour shares, worth [euro]3.8bn ([pound]2.58bn), by the luxury goods magnate Bernard Arnault and the Los Angeles-based investment company Colony Capital caused feverish speculation in France yesterday that the supermarket chain is a bid target.
The raid – not signalled in advance to Carrefour or its large shareholders – bears some resemblance to the possible bid for J Sainsbury in Britain by a group led by CVC Capital Partners. In both cases, it is suggested that private-equity companies may be interested in spinning off the vast portfolios of real estate owned by the supermarket giants into separate property businesses. Colony Capital has specialised in brokering similar deals to divide hotel groups such as Accor into management and property-owning companies. Analysts believe Carrefour’s property portfolio could be worth [pound]22bn.
Carrefour, which is due to unveil 2006 results today, named Robert Halley as chairman yesterday to replace Mr Vandevelde. The Belgian was known to be under pressure after being ousted as head of the holding company which manages the wealth of the Halley family at the start of year.
Carrefour claims to be the world’s largest supermarket operator with more than 900 stores in Europe, Latin America and Asia. The Halley family has a 13 per cent equity stake – which carries 26 per cent of the voting rights – in Carrefour dating back to the sale of their Promodes chain to the supermarket group in 1999.
Its shares have declined in value in recent years under price- cutting pressure from other French supermarket chains. However, they have risen by 20 per cent since the start 2007 amid rumours the group is in play. In Paris yesterday the shares hit their highest level since 2000 before closing 2 per cent down on the day at [euro]52.80, valuing the company at about [euro]37bn.
The involvement of M. Arnault in the investment in Carrefour – at a personal cost of an estimated [euro]1.5bn – puzzled business commentators in France. Although he made his reputation, and a [euro]17bn fortune, as a market raider, the French tycoon has settled down in recent years to concentrate on his LVMH luxury goods empire, ranging from Louis-Vuitton to Dior to champagne labels. There is no immediately obvious synergy between LVMH and Carrefour, which operates at the other end of the retail market.
"Arnault probably thinks that Carrefour has passed its lowest point and will find dynamism in the years to come," said Guy Francheteau, an analyst at the Paris-based firm Fideuram Wargny Securities . " I think it’s a financial investment for four to five years. He chose this timing to enter at the low point in the cycle."
M. Arnault and Colony have set up a jointly-owned company to buy the Carrefour shares. "They may think there is some value to be extracted from the real estate and are buying now ahead of possible future events," said Vincent Hamel, an analyst at ING Wholesale Banking.
There have been reports that Mr Vandevelde himself bought a [euro]10m stake in Carrefour in February, amid reports he was trying to organise a private-equity consortium to buy Carrefour. A former Carrefour chairman, Daniel Bernard, ousted in 2005, was also said to be trying to organ-ise a buyout.
Sources close to M. Ar-nault yesterday denied links to either man.
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