Canada's Couche-Tard and French retail giant Carrefour end $20bn takeover talks

A merger would have created a retail powerhouse, combining Couche-Tard’s North America-focused network with Carrefour’s European operations

A customer pushes his shopping trolley in front of a Carrefour Hypermarket in Saint-Herblain near Nantes, France. Couche-Tard and Carrefour have droppe talks for a potential tie-up. Reuters

Canada’s Alimentation Couche-Tard and Carrefour broke off talks on a proposed $20 billion deal in the face of strong opposition from France’s finance minister to the tie-up, source said.

The decision to halt negotiations came after top executives of the Quebec-based convenience-store operator flew to Paris to offer the government several sweeteners: billions of euros of investment in Carrefour stores, no job cuts for at least two years and dual stock listings in France and Canada.

It was not enough to persuade finance minister Bruno Le Maire, who told executives in a private meeting on Friday he was standing by his position that a takeover would be bad for France. Earlier, Mr Le Maire said on BFM TV: “To sum up: it’s a no. A courteous no, but a no that is clear and definitive”.

Couche-Tard executives are flying back to Canada after the failed talks, sources said. While discussions are on ice for now, they could be revived later if the government changes its position, they said.

A merger would have created a retail powerhouse, combining Couche-Tard’s North America-focused network of 14,200 convenience stores with Carrefour’s sizable European operations, which include hypermarkets and smaller outlets. Carrefour has more than 7,000 convenience stores and gets almost all of its revenue from Europe and Latin America.

Couche-Tard, Canada’s largest retailer by market value, faced hurdles from the outset for its offer of €20 per share. Mr Le Maire signalled that even if both parties agreed to the transaction, regulators might still block it. Carrefour shares fell 2.9 per cent to €16.61 in Paris on Friday. Couche-Tard rose 4.8 per cent to $37.98 Canadian dollars in Toronto.

Representatives from Carrefour and Couche-Tard did not respond to requests for comment. Reuters first reported the decision to stop negotiations.

For French President Emmanuel Macron, the political stakes are high with local polls later this year and presidential election in 2022. The campaign is already on, with his handling of the pandemic making him open to criticism. The loss of a well-known French company to a foreign takeover could fuel nationalist Marine Le Pen, his primary rival for leadership.

France has often objected to foreign attempts to take over its blue-chip companies – frowning on talk of an approach from Pepsi to yogurt maker Danone in 2005, for example.

The bid for Carrefour was especially sensitive because it is France’s largest private employer. On top of that, the pandemic has thrust jobs and the nation’s food supply to the top of the political agenda.

“If this deal continues, food sovereignty comes before everything,” Mr Le Maire said earlier this week, citing a decree he introduced in 2019 on state screening of foreign investments.

France is not the only country caught in a wave of protectionism that has been heightened by companies’ suffering due to the coronavirus pandemic. The UK late last year drew up plans to give the government sweeping powers to intervene in foreign takeovers of assets deemed a threat to national security.

Some Couche-Tard analysts had questioned the deal’s strategic rationale and said it would not create significant cost savings as there is little overlap between the two companies’ store networks. Bonds issued by both retailers slipped on concerns that the deal would swell the combined company’s debt burden.

The ending marks the second time in nine months that Couche-Tard has come close to a major takeover, only to see it fizzle out.

In April, the company cited the pandemic as a reason for walking away from a $5.6bn proposal for gas station chain Caltex Australia (now known as Ampol), ending a six-month pursuit. Its largest acquisition to date is Texas-based CST Brands, a rival chain it agreed to buy in 2016 for about $4bn.