Although the history should be known Who will be the new owner of Carrefour’s local operations It has been extended until mid-December, and one of the groups competing in this process hopes to be able to declare itself a “winner” before this deadline.
This is one of the most resonant economic news items and has the greatest potential impact on the Argentine retail sector recently, considering that it implies the transfer of all activities in Argentina to one of the main parties, namely the global supermarket business.
The holding company seeks to maintain its business in markets that it considers strategic and in which it does not need to allocate millionaire funds to benefit from its operations, as is the case in Argentina, which for many years has not been an attractive country for multinational companies.
This process is part of a global review plan announced by Alexandre Bompard, Carrefour’s global CEO, with the aim of liquidating assets and subsidiaries considered non-strategic to finance its investments in France, Spain and Brazil.
The deadline for compliance with this requirement was set by Deutsche Bank last November 18 at 5:00 p.m. In Argentina.
On that day, the German financial institution revealed that no offers had been received and, on the contrary, had requested more information regarding Carrefour Argentina’s operations and finances.
However, surprisingly, de Narváez’s financial offer was leaked to some local media as a way to put pressure on the selection process.
Early winner?
The deal includes 700 stores in various formats, as well as its own financial entity as a financial services bank, an employee network of 17,000 employees, operations in 110 municipalities and a market position of 21.1%.
In the GDN Group, led by Francisco de Narvaez, there are those who have already been considered “those chosen” by the Board of Directors of Carrefour France to add these assets to their business in this sector in which they participate with the Changomás chain born after the purchase of the local operations of Walmart in 2020.
Before the end of November, at the deadline for submitting economic proposals, this group was the only one to submit a concrete proposal and promised to pay US$1,000 million to strengthen de Narváez’s department store empire in the country.
Currently, the chain led by De Narváez operates 92 stores in different formats in 21 provinces and in the federal capital, but its most important presence is in the province of Buenos Aires, where it has 31 stores, including hyper and super formats, but it also has a large market in other provinces such as Mendoza (5 stores), Tucuman (5), Cordoba (6), Río Negro (4) and Salta (4).
But if he is elected by the European Community Board of Directors, he will add all of Carrefour’s assets in the country and will control the gondola giant, which will occupy about 29% of the market; It will employ 39,000 people and operate nearly 800 branches.
Although the businessman is leading the operation with the GDN, he also has several important “partners” in this dispute such as the French investment fund L Catterton and IRSA, the largest real estate developer in Argentina headed by Eduardo Elstein.
Extension of deadlines
They recognize in the market that the aforementioned support “confirms the seriousness of the offer and its financial support”, and they confirm that the offer made by GDN to Deutsche Bank, the entity responsible for the sale, cannot be matched by the other two groups interested in acquiring Carrefour Argentina.
That is, the group led by Alfredo Couto and the North American investment fund Clough Realty, which were also involved in the dispute but asked for more time to make offers like De Narvaez’s.
However, in this sector, it is taken for granted that Carrefour’s parent company can make the announcement, not wait to receive these offers and announce that the owner of Changomás will also be the future owner of Carrefour Argentina.
The explanation supporting this possibility is based on the fact that neither Couto nor Clough Realty is in a position to match or exceed the $1 billion offered by de Narváez, and neither of them can guarantee the French group other benefits guaranteed by the former National Representative of the European Community.
In any case, it is a final offer, but it is subject to corrections that may arise from the audit and the final balance, which means that the final amount is conditional on verifying the real numbers of the series when the transaction is closed.
Maintain the brand
Among other differences with other competitors, there is the possibility that the Carrefour brand will not disappear from Argentine shelves like Walmart did.
This is because De Narváez’s strategy is to keep Carrefour in the countryIf its offer is accepted, it will negotiate with the parent company in Paris to operate the brand under a licensing or franchising system.
This model would allow the new operator to benefit from Carrefour’s reputation and proven track record in the country, and avoid a costly transformation of its more than 700 branches.
However, it is not a simple task because the agreement will be linked to an important series of conditions that the French group will impose on de Narváez that are linked, more than anything else, to compliance with the required quality and operating standards.
The market recognizes that there is potential for an agreement of this type, in addition to highlighting that the GDN group reaches the final stage with other advantages such as a low probability of objections from the government due to the potential struggle for market share.
This means that there would be no risk of monopoly or dominant position that would force the National Commission for the Defense of Competition (CNDC) to take measures to limit the deal since the Changomás network does not overlap much with Carrefour stores in the Buenos Aires Metropolitan Area (AMBA) and does not compete significantly in the interior of the country.
In Koto they don’t give up
However, both Coto and Klaff Realty, which in Uruguay controls the Tienda Inglesa supermarket chain, expect Carrefour to meet deadlines and wait for proposals it is improving to submit before December 15.
In the case of the Coto family, he formed an art group with UBS as a financial advisor; Consulting firm Deloitte; The law firm Bomchil, which advises the largest French groups in Argentina, the consulting firm S+R Gestion, and even a French M&A shop operating under the brand name EuroLatina Finance.
All of this is led by Germain Cotto, Alfredo’s eldest son, who is currently in charge of the chain’s expansion and is preparing to consolidate the succession of his father, who is currently 83 years old.
The chain has more than 120 branches and 36 hypermarkets in the country, 81 supermarkets and eight mini markets, with the majority of these stores located in Greater Buenos Aires. It also operates three meat processing plants and a poultry factory, from which it exports to the rest of the world.
The background also poses a fight
In the case of the Klaff Realty fund, it does not have a presence in Argentina, as it so far controls the Tienda Inglesa chain in Uruguay, which gives it experience in the sector, in addition to having funds to meet the French group’s economic demands for approximately $2,000 million to sell its Argentine operations.
The purchase closed in the neighboring country for US$120 million, and almost immediately, the fund launched an expansion plan that has about 100 branches in operation today, more than 4,000 people and billings of about US$750 million annually.
In addition, the Tienda Inglesa brand has high visibility among Argentines vacationing in Uruguay, so much so that if they are chosen to remain with Carrefour Argentina, they will implement a transition plan of approximately one year to install this brand to replace the French chain.