Promodes launches pounds 2.9bn bid for rival

The French retail market looked set for further consolidation yesterday when the Promodes group launched a Fr28bn (pounds 2.9bn) takeover bid for the rival Casino group and its largest single shareholder, the Rallye holding company.

Analysts said the deal would transform Promodes into France's largest retailer with a market share of more than18 per cent. The combined group would have sales of around Fr170bn and a presence in 15 countries and four continents. It will also catapult Promodes into the top three supermarket groups in France.

Promodes' long-rumoured interest in Casino was fuelled by legislation in France which has made it much harder for supermarket and hypermarket groups to open new outlets. The tightening of planning regulations has already led to the Auchan group taking over Docks de France last year while Carrefour has built up a 41 per cent stake in the Cora chain.

Promodes is offering Fr340 for every Casino ordinary share and Fr270 for every preference share. The Rallye bid is pitched at Fr420 per share.

Analysts said the merger would generate significant economies of scale and vault Promodes from number five to among the top two or three food retailers in France. One analyst estimated the potential cost benefits of the deal at around 0.5 per cent of turnover.

Promodes said the offer represented a premium of 15 per cent to Casino's closing price on Friday and a 19 per cent premium to the average price over the past three months. The Guichard-Perrachon family controls around 12 per cent of Casino's shares.

Casino and Rallye said the bids were unsolicited. They declined to comment on the approach yesterday but said they would announce their responses today after a board meeting.

Euris, controlled by Jearn-Charles Naouri, owns 56 per cent of Rallye, which in turn holds 28 per cent of Casino and 36 per cent of the voting rights.

"If Rallye and the Guichard family don't bring their shares, the bid fails," said a spokeswoman for Casino.

If Promodes pulls off the deals the enlarged company would have net debt of almost Fr30bn. The company said its strong cash-flow would reduce the figure to around Fr16bn after two years.

The deal would increase the pressure on Carrefour, the French hypermarket group.

Simon Raggett, analyst at William de Broe, said the deal was likely to be the last major consolidation in the French retail sector. "The map has deteriorated for Carrefour. It is now faced with two megagroups," he said.

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