By Pamela Barbaglia and Gwénaëlle Barzic
LONDON/PARIS (Reuters) – Canada’s Alimentation Couche-Tard has dropped its 16.2 billion euro ($19.6 billion) bid to acquire European retailer Carrefour (PA:) SA after the takeover plan ran into stiff opposition from the French government, two sources familiar with the matter told Reuters on Friday.
The decision to end merger talks came after a meeting on Friday between French Finance Minister Bruno Le Maire and Couche-Tard’s founder and chairman, Alain Bouchard, the sources said, speaking on condition of anonymity as the matter is confidential.
Couche-Tard and Carrefour declined to comment.
Earlier on Friday, France ruled out any sale of grocer Carrefour on food security grounds, prompting the Canadian firm and its allies to mount a last-ditch attempt to salvage the deal.
“Food security is strategic for our country so that’s why we don’t sell a big French retailer. My answer is extremely clear: we are not in favour of the deal. The no is polite but it’s a clear and final no,” Le Maire said.
Couche-Tard was hoping to win France’s blessing by offering commitments on jobs and France’s food supply chain as well as keeping the merged entity listed in both Paris and Toronto, with Carrefour boss Alexandre Bompard and his Couche-Tard counterpart Brian Hannasch leading it as co-CEOs, one of the sources said.
The plan also included a commitment to keep the new entity’s global strategic operations in France and having French nationals on its board, he said.
Couche-Tard was also going to pump in 3 billion euros of investments to the French retailer – a plan that was widely backed by Carrefour which employs 105,000 workers in France, its largest market, making it France’s biggest private-sector employer.
Late on Friday, a Canadian government source said that while it is politically possible to decide not to allow the country’s largest employer to pass into foreign hands, “one cannot accuse a Canadian flagship like Couche-Tard of endangering the entire country’s food sovereignty.”
France’s opposition, with ministers shooting down the offer less than 24 hours after talks were confirmed, sparked disquiet in some business circles over how French President Emmanuel Macron decides which foreign investment is welcome and which is not.
Some politicians and bankers said the pushback could tarnish Macron’s pro-business image, while others highlighted that the COVID-19 crisis had forced more than one country to redefine its strategic national interests.
The comments sparked a trans-Atlantic flurry of lobbying and Couche-Tard’s Bouchard flew to Paris to explain the merits of the deal to Le Maire, the source said.
But the finance minister reiterated his opposition without listening to the terms of the transaction and said any such deal should not be revisited before France’s presidential elections in 2022, the sources said.
Couche-Tard initially explored the possibility of pursuing its offer despite the government’s stance on the deal, but later decided to raise the white flag and avoid a political storm, one of the sources added.
Canadian Prime Minister Justin Trudeau, asked about the prospects for a deal, said he would always be there to help Canadian firms succeed internationally and he spoke this week to Macron.
Carrefour launched a five-year overhaul plan in 2018 to cut costs and boost e-commerce investment to contend with online competitors as well as domestic rivals such as Leclerc. It has also expanded into convenience stores to reduce reliance on the big hypermarkets that still account for the bulk of its sales.
With food retailers across the world benefiting from surging demand as more consumers stay home during the COVID-19 pandemic, Carrefour reported robust third-quarter results in France as well as other key markets in Brazil and Spain.
CEO Bompard has repeatedly said the retail sector was bound to consolidate and that his mission was to ensure Carrefour emerges as a winner.
($1 = 0.8282 euro)