Carrefour, Promodes Gird For Wal-Mart Dave Marino-Nachison (TMF Braden)
August 30, 1999
It's not quite Normandy, but two French retailers scurried to erect their defenses against an American invasion today as Carrefour moved to create the world's second-largest retailer by bidding more than $16 billion for rival Promodes.
The move was intended in large part to hold off Arkansan Wal-Mart (NYSE: WMT), which with nearly $138 billion in fiscal 1999 revenues would still dwarf the combined companies. Together, Promodes and Carrefour would have about $50 billion in annual sales.
On foreign exchanges, the stocks of several other European retailers jumped into action. Although most Continental chains aren't traded in the U.S., one that may be worth watching is Dutch grocer Koninklijke Ahold (NYSE: AHO). A spokesman for Ahold, which has significant holdings here in the U.S., told Reuters it was looking at options in France, Britain, Italy, and Spain but wouldn't carry out any hostile bids. German chain Metro, formerly the world's #2, is also scoping possibilities.
Reports said Spanish "hypermarket" chains Continente and Pryca, controlled by Carrefour and Promodes respectively, would likely soon combine.
Mammoth Wal-Mart can take credit for the sudden feeding frenzy among European retail investors. Already strong in Latin America and starting to expand in China and Korea, its recent move to pick up U.K. grocer ASDA for nearly $11 billion -- combined with its ownership of two German hypermarket chains -- has stoked a fire in the acquisition engines of European retailers.
"We are still smaller than the biggest companies that are far from renouncing their intentions to become ever more powerful," Carrefour director Daniel Bernard said at a news conference.
(For a Foolish take on the advances of American office supply chains into European markets, click here.)
And Wal-Mart is certain to be examining further options. With the U.K. and Germany already invaded, the company needs only a French acquisition to have footholds in Europe's top three markets. French supermarket company Auchan, a family-owned operation, said in June that Wal-Mart came calling.
Some analysts suggested Wal-Mart might regard today's news deal as little more than a temporary setback and simply swoop in to acquire the combined company. Wal-Mart certainly has considerable weight to throw around; its market capitalization is some four times that of Carrefour and Promodes together.
The Normans, after all, will remember that although the landing on their beaches was difficult at first, the Americans wouldn't be denied for long.