Casino Guichard-Perrachon SA’s shares plunged as investors size up competing offers to rescue the troubled French grocer from groups headed by two billionaires, each of which would leave existing holders with almost nothing.
(Bloomberg) — Casino Guichard-Perrachon SA’s shares plunged as investors size up competing offers to rescue the troubled French grocer from groups headed by two billionaires, each of which would leave existing holders with almost nothing.
The retailer late Tuesday published details of the two bids, which are led by French telecommunications entrepreneur Xavier Niel and Czech financier Daniel Kretinsky. Despite its debt woes, the company holds appeal for potential investors because of its Monoprix and Franprix stores’ prime locations in Paris and other French cities. Shares fell as much as 42% in Paris on Wednesday.
The Niel-led group, known as 3F, also includes banker Matthieu Pigasse and retail entrepreneur Moez-Alexandre Zouari. With the help of secured creditors, their offer would inject €900 million ($979 million) of fresh money into the business, although the equity portion is just €450 million.
Funds including Attestor Capital, Davidson Kempner Capital Management and Farallon Capital Management are set to contribute to the cash injection, according to people familiar with the matter, who asked not to be named because they can’t talk about it.
Under Kretinsky’s plan, he and Marc Ladreit de Lacharrière’s Fimalac — both of which are existing shareholders — would instead provide a €1.35 billion equity injection.
Casino is meeting with representatives of the French Finance Ministry and creditors Wednesday to discuss the proposals, the people said. Notes issued out of the Quatrim unit, which are backed by real estate assets, gained almost 8 cents on the euro to 78 cents as both bidders want to reinstate the notes extending the maturity by four years.
A spokesperson for Casino declined to comment. Representatives for the Finance Ministry and the funds weren’t available to comment.
The rival bids are the latest twists in a long-running saga for Casino, which has said that its restructuring will result in shareholder dilution and Chief Executive Officer Jean-Charles Naouri losing control.
Although Kretinsky’s offer includes more equity, there may be pressure on Casino, its creditors and President Emmanuel Macron to find a French solution to the company’s problems. French regulators previously blocked a proposed takeover of Casino rival Carrefour SA by Canada’s Alimentation Couche-Tard Inc.
Court Talks
Casino has been seeking to cut its debt with asset sales since 2018, but its concentration in areas heavily reliant on tourism backfired during the pandemic and a strategy to raise prices more than its competitors added to Casino’s woes more recently. The company eventually entered into court-supervised talks with creditors and other stakeholders — including the French state — to restructure its balance sheet in May.
But in the meantime, the French grocer is pursuing a business plan designed around its smaller, premium supermarkets in city centers. Even though it’s keeping its cash-burning hypermarket operations in France, the group is planning to sell non-core assets such as its business in Latin America.
The retailer said last week it was looking for no less than €900 million in fresh money, and to convert €3.5 billion of unsecured debt and as much as €1.5 billion of secured facilities into shares in order to fix its finances.
The two offers differ in the size of the equity check and debt cut, and may appeal to different stakeholders. Kretinsky made a firm offer, while 3F’s plan is pending due diligence.
What Bloomberg Intelligence Says:
Casino’s creditors face exacting choices after both new equity rescue proposals from EPGC/Fimalac and 3F and Partners leave secured debt holders with only about 35% of the company (the unsecured only about 3%) while the equity investors would own more than 50%. Secured debt holders would continue to hold a proportion of their debt on an extended maturity. Existing equity holders would, at best, be left with 0.2% of the company.
– Charles Allen, retail analyst
To read the full note, click here
The Czech billionaire is planning to reduce indebtedness to €2 billion while providing most of the equity injection. That would mean a large stake for himself in the restructured company.
The 3F offer allows for a bigger role for creditors that are willing to participate in the equity raise, which are typically funds that invest in debt at a discount and want to maximize their returns with an equity stake. The plan would leave the company more leveraged than Casino had envisaged with €3.7 billion of debt.
Both bidders agreed to keep Casino’s headquarters in Saint-Etienne, a town south-west of Lyon. The 3F have also agreed to keep the same level of employment in the core group, while Kretinsky doesn’t make explicit reference to that, the company said.
At the meetings Wednesday, creditors and Casino will discuss which offer to use in a restructuring plan the company will propose by the end of the month. Once the court-supervised discussions with creditors — known as conciliation — are over, the company needs to open proceedings to implement the restructuring plan. It needs the backing of two thirds of one creditor class to approve the plan and make it binding for the rest, even those who disagree with the proposal.
(Updates with funds in fourth paragraph, adds sections in table, Finance Ministry meeting in sixth and BI comment.)
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