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Monday, August 30, 1999 Published at 16:43 GMT 17:43 UK

Business: The Company File

French hypermarket merger

French supermarkets are facing their biggest challenge

French hypermarket chains Carrefour and Promodes are merging to create to the world's second largest retail group.

The BBC's Mike Johnson: "This proposed merger will create Europe's biggest retailer"
Carrefour is offering six shares for one in its rival in a friendly deal that has been unanimously recommended by the Promodes board.

The offer represents a big premium on Promodes' Friday share price, valuing the group at $16.6bn.

Shares in Promodes closed up 18% on the Paris stock market following the announcement.

[ image: Wal-Mart is stalking Europe]
Wal-Mart is stalking Europe
Carrefour chairman Daniel Bernard will head the new group.

The merger is being driven by the fear that Wal-Mart, the mighty US retailer whose sales dwarf its European rivals, might swoop on France.

Wal-Mart, which is looking for more international acquisitions to boost its growth, has already bought the UK's Asda supermarket group and two food retailers in Germany.

New retail giant

Retail Management Consultant Robert Clark talks about how significant the merger is
The new group will have 8,000 stores and nearly 200,000 employees, with a strong presence in southern Europe and Latin America as well as France.

The new company says its expects double-digit sales growth in 1999.

[ image:  ]
Carrefour is France's second largest supermarket group, selling everything from food to computers in its hypermarkets. It has 134 hypermarkets in France, and also operates supermarkets under the Stoc, Picard and Marche Plus brands. With a market capitalisation of $34bn (£21bn) it would be the senior partner in any share swap.

Promodes, the smaller partner, is controlled by the Halley family.

It operates hypermarkets under the Continent brand in France, Belgium, and Spain, as well as owning 1,344 supermarkets and thousands of Dia discount stores (mainly in Spain and Portugal).

Together, the combined group would have sales of $54bn (£34bn) and net profits of nearly $1bn (£600m).

Both groups have a significant international presence. Carrefour derives 23% of its sales from Latin America, and is the market leader in Brazil. Promodes is prominent in Spain and Italy, and also has stores in Argentina. Together the group would be the largest retailer in nine countries: France, Belgium, Spain, Portugal, Greece, Brazil, Argentina, Taiwan and Indonesia.

Takeover rumours

Carrefour has been the subject of takeover rumours for weeks, with one suggestion that Dutch retail group Ahold was preparing a bid.

German supermarket chain Metro, Europe's largest before the French merger, said it was watching developments "very keenly". Metro, which has 40% of its sales outside Germany, is likely to be interested in expanding its international presence.

Other big French supermarket groups, like Intermarche, Auchan, and Leclerc, may now become takeover targets, with the more highly rated shares of UK supermarkets like Tesco and Sainsbury's making such acquisitions attractive.

Auchan said it had been approached by Wal-Mart in June.

Given the strict planning controls in most of Europe, mergers are one of the few ways of creating larger retail groups.

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