Seeing a ‘sovereignty’ threat (and pasta risk), France opposes Carrefour takeover

January 14, 2021, 11:39 AM UTC

To the French supermarket giant Carrefour, the offer from Canada’s Couche-Tard to buy it for nearly $20 billion is simply “a friendly approach,” as company officials put it on Wednesday, with talks described as “very preliminary.”

But to the French government, the potential sale was akin to a national security threat to one of the world’s biggest economies—and on Thursday, Paris seems determined to stop it.

“The day you go to Carrefour and there is no longer any pasta, no more rice, no more essentials, what then?” French Economy Minister Bruno Le Maire said on France 5 Television on Wednesday night. “Carrefour is an essential link in the sovereignty and food security of the French.”

It is also, apparently, vulnerable to a takeover.

Overnight Tuesday-Wednesday, Couche-Tard, which owns Circle-K convenience stores, made a surprise offer to buy Carrefour for €16.3 billion, or nearly $20 billion, at $20 per share, about 29% above its closing price that day. Carrefour’s share price, pummeled during months of coronavirus lockdowns last year, soared 10% on the news.

Couche-Tard is a minnow by comparison to the French giant: The Canadian company, whose full name is Alimentation Couche-Tard Inc., has revenues of about $54 billion, roughly half of Carrefour’s. But Carrefour’s share price has slid steadily over the past five years as it faces stiff competition at home from several large supermarket chains, including Auchan and Leclerc.

Despite Carrefour’s weaknesses, Couche-Tard—far smaller than Carrefour—could face a tough fight in securing the sale. That much was clear on Thursday, as the French government began mounting its defense of one of its prized assets, casting the potential deal as a looming disaster.

On Thursday morning, French Minister of Labor Elisabeth Borne said on Europe 1 Radio that she, like Le Maire, opposed the sale. “I am not in favor of calling Carrefour’s current shareholding into question, so it can pursue its strategy,” she said, explaining why she did not want the sale to proceed. Couche-Tard could face stiff opposition from French unions, which have a strong presence in Carrefour supermarkets; the Canadian company has for years blocked unions from organizing among its workforce.

In fact, the French government has legal powers to block the sale, under a law that stops foreign takeovers of strategic industries. For years, it has nervously sought to keep foreign companies from taking over key parts of its economy. In 2014, the former Socialist government blocked General Electric from buying part of the Alstom group, and in late 2019 France widened the list of strategic industries to include “food security.” When the pandemic hit last year, Le Maire said he was determined to protect French industry from foreign takeovers at a time when France faced soaring coronavirus cases. “Certain businesses are vulnerable,” he said last April. “Certain technologies are weakened and could be bought at a low price by foreign competitors. I will not let that happen.”

That promise will now be tested, as the government seeks to stop the Carrefour sale.

Aside from its need to keep the company in French hands, there is another crucial issue at stake, one that is quintessentially French: pride. The sale to a far smaller foreign competitor is seen as a possible sign of the country’s diminishing global economic clout. “It’s the reverse of the food chain,” the country’s business daily Les Echos said on Wednesday. “The little wants to eat the big, according to all points of view.”

France sees "sovereignty" threat in a Carrefour deal