The French retail giant Carrefour is to spin off a large chunk of its property portfolio into a separate listed company next year.
The move comes five months after France's richest man Bernard Arnault, the luxury goods magnate, and Los-Angeles-based private equity investor Colony Capital took a 9.1 per cent stake in the retailer. This triggered speculation that the French retailer was a bid target and that Carrefour would take a more activist approach to managing its portfolio of properties.
Carrefour said it would float its property subsidiary Carrefour Property, which consists of 60 per cent of the group's portfolio, subject to market conditions. The total property portfolio is valued at between €20bn and €24bn (£13.5bn and £16.3bn) and represents 280 hypermarkets and 540 supermarkets, Carrefour said. Previous estimates had put the value at €15bn to €20bn. It intends to raise €3bn from the float by opening a portion of the capital to outside investors. Around €4.5bn will be returned to shareholders following the float and further asset sales.
Carrefour yesterday reported that first-half recurring net profit edged up 0.1 per cent to €741m, beating expectations, and reaffirmed a forecast that 2007 sales would grow more quickly than in 2006. Operating profit rose 0.3 per cent to €1.364bn on net sales up 5.5 percent at €38.845bn. Severe price discounting in key European markets had offset strong growth in Latin America and Asia.
"These results are in line with our commitments and our expectations...despite the most competitive price environment in the past 10 years," Carrefour chief executive Jose Luis Duran said, adding that the company would also make tactical disposals and acquisitions. "We have to guarantee a better profitability of our portfolio," he said. "We will continue to sell unprofitable and non-strategic assets and strengthen external growth."
He had previously stressed that there were risks involved in grocery chains selling property because rent rises subsequently imposed by external landlords could destroy profit margins. The supermarket group Sainsbury's, which remains in takeover talks with the Qataris' Delta Two Investment Fund and was the subject of a failed private equity bid earlier this year, has been resistant to calls from shareholders to split off its property portfolio.
M. Arnault made his reputation as a market raider but has recently concentrated on his LVHM luxury goods empire.