Carrefour and Promodes poised for pounds 30bn merger

TWO FRENCH hypermarket groups, Carrefour and Promodes, are expected to announce a pounds 30bn merger today that will dramatically alter the landscape of European retailing. The deal would create the second largest retailer in the world after the American giant Wal-Mart.

The boards of the two companies met yesterday, according to French media reports, and have called a press conference for this morning led by Daniel Bernard, chairman of Carrefour, and Paul-Louis Halley, the Promodes chairman. French newspapers suggested the pair will announce a share swap deal to create a new European retail powerhouse.

The deal would be seen as a defensive measure designed to preempt the possible entry of Wal-Mart into France. Wal-Mart has already bought two supermarket chains in Germany and entered the UK market this month when it completed its pounds 6.7bn takeover of Asda. City analysts have mentioned Carrefour and Promodes as possible targets for Wal-Mart should it seek to expand into the second largest market in the Euro-zone.

A Carrefour-Promodes tie-up would place further pressure on UK supermarket groups such as Tesco and Sainsbury to achieve greater scale through pan- European deals.

Carrefour and Promodes are mainly food retailers, with several well-known supermarket networks, but their hypermarkets also sell everything from clothing to computers.

Carrefour operates more than 350 hypermarkets in 21 countries including in Asia and Latin America, which accounted for almost a quarter of its sales last year. Promodes operates hypermarkets and supermarkets as well as discount and convenience stores. It is strong in Europe, particularly Spain where it is market leader.

Carrefour is valued at pounds 21bn while Promodes is capitalised at pounds 7.8bn. Together they would have sales of pounds 30bn.

UK analysts have been predicting pan-European mergers as major retailers combine to increase economies of scale and form stronger units in the face of the Wal-Mart threat.