France's two largest retail groups, Carrefour and Promodes, are expected to announce a friendly merger based on an exchange of shares today. If completed, the merger will create the world's second largest food distributor, after the US giant Wal-Mart. Carrefour was until now ranked 6th in the world and Promodes 9th. The merged group will have a stock market capitalisation of €45 billionn and an annual pre-tax turnover of €47 billion.
The boards of Carrefour and Promodes met yesterday to speed up their marriage, after Le Figaro divulged their plans on Saturday. Shares in both companies rose as rumours took hold on Friday, with Carrefour closing up 2.86 per cent at €140.3 and Promodes up 6.71 per cent at €700. The French banking and fuel sectors have begun to consolidate with the BNP-Paribas merger and negotiations to combine Elf Acquitaine and TotalFina oil companies. The French food distribution and supermarket industry had already begun to restructure itself, with the earlier, smaller scale marriages of Carrefour and Euromarche Auchan and Mammouth, Casino and Rallye. The Systeme U and Leclerc networks are also drawing together.
France is well-placed in the sector, with six of the world's top ten food distribution companies. Carrefour owns the Carrefour, Ed, Picard and Stoc supermarkets, and Promodes represents Continent, Shopi, 8 a Huit and Champion.
French analysts say other large European distributors, including Metro from Germany, Ahold from Holland and Tesco from the UK are also looking for partners in the race for size.
Promodes is controlled by its founder, Mr Paul-Louis Halley from Normandy. At age 65, Mr Halley would like to retire and was negotiating with Ahold, which had earlier baulked at the higher price of acquiring Carrefour. But Mr Halley decided he preferred a friendly merger with a French company.
French distributors have been encouraged to consolidate by the Royer Law, which limits further construction of the giant, warehouse-size supermarkets known here as hypermarches The Carrefour-Promodes group will be the leader in Spain, Italy and Turkey, and will be well represented in South America and Asia, thanks to Carrefour's inroads there.
The arrival in Germany of the American Wal-Mart in 1998 alarmed European food distributors and led to a wave of strikes by supermarket workers in Germany. WaL-Mart has also expanded into the UK with the £6.7 billion sterling acquisition of Asda.
Wal-Mart owns 3,600 stores throughout the world, and employs one million people. The French food sector is deeply suspicious of the US company, which it accuses of undercutting competitors by creating low-paid "McDo jobs".
