Canada’s Alimentation Couche-Tard Makes $20B Bid For Carrefour

Carrefour has received a non-binding takeover offer from Canada’s Alimentation Couche-Tard at a price of €20 per share, valuing the French supermarket chain at €16.2 billion euros ($19.72 billion).

Carrefour (0NPH) confirmed that the takeover talks were at a preliminary stage. Meanwhile, Alimentation Couche-Tard disclosed that it expects a “large majority” of the deal consideration to be funded in cash. For now, though, the terms of the transaction are still under discussion and remain subject to due diligence. Carrefour shares dropped 6.2% and were trading at €16.46 in Paris after gaining as much as 17% on Wednesday. Alimentation shares closed 10% lower in US trading.

“There can be no certainty at this stage that these discussions will result in any agreement or transaction,” Alimentation Couche-Tard stated. “In considering strategic transactions, Couche-Tard will remain focused on creating stakeholder value.”

Alimentation Couche-Tard (ANCUF) is a convenience store operator, with a market cap of about C$46 billion as of Jan. 12. In the US, it is the largest independent convenience store operator, with a network of more than 9,000 stores. In Europe, Couche-Tard has a foothold in convenience store and road transportation fuel retail in the Scandinavian countries, in the Baltic countries, as well as in Ireland and Poland.

The potential deal is already facing some initial concerns by the French government.

“At first glance, I am not in favour of this operation. French food sovereignty is a key issue,” French Finance Minister Bruno Le Maire told France 5 TV.

Commenting on the takeover talks, Raymond James analyst Benjamin Brownlow, who has a Buy rating on Couche-Tard stock, said that a proposal to buy all of Carrefour would likely create shareholder concerns.

“Couche-Tard’s track record with capital allocation and M&A in the convenience store industry has been impressive over the last decade,” Brownlow wrote in a note to investors. “That said, we struggle to find the strategic rationale for CoucheTard acquiring the entire Carrefour SA business (all formats and stores), given that a sizable part of Carrefour’s operations are in formats that Couche-Tard currently does not operate.” (See ANCUF stock analysis on TipRanks)

“In addition, the hypermarkets, supermarkets, and cash & carry stores face very tough competition from other multinational retailers. In our view, expanding into this area of retail is not nearly as attractive as consolidating the highly fragmented convenience store space (Couche-Tard’s area of expertise), given the competition,” the analyst summed up.

Overall, the rest of the Street is bullish on the stock with a Strong Buy analyst consensus backed by 8 Buys versus 2 Holds. The average price target stands at $41.06 and implies 41% upside potential over the coming year.