Billionaire Xavier Niel and two partners approached ailing French grocer Casino Guichard-Perrachon SA with a €1.1 billion ($1.19 billion) rescue plan, seeking to counter a rival offer from another group of investors.
Casino received a preliminary letter of intent from the trio, which seeks to boost the group’s equity by as much as €1.1 billion, including up to €300 million invested directly by them, the company said Wednesday. The trio would need to raise the rest from new partners and current creditors wishing to reinvest in the debt-laden retailer.
“This proposal would be accompanied, to the extent necessary, by an adaptation of Casino’s existing debt to its capacities and the preservation of its growth potential,” according to a statement. The offer is preliminary, the grocery chain added.
The proposal by Niel, retail entrepreneur Moez-Alexandre Zouari and banker Matthieu Pigasse follows an earlier offer to lead a €1.1 billion equity injection by Czech businessman Daniel Kretinsky, who already owns a stake of about 10% in Casino. That proposal is conditional on Casino slashing its €3.6 billion of unsecured borrowings, through bond buybacks and a conversion of debt into equity. A Kretinsky representative declined to comment on the trio’s proposal.
Shares in Casino jumped more than 20% on the news. They remain lower by about the same amount this year, and the letters of intent received by the company imply a dilution for existing shareholders if any of those offers go through.
Niel and his partners said last week that they were working on a rescue plan following the end of exclusive discussions between the grocer and retailer Teract SA, whose shareholders include the three investors and French agricultural firm InVivo.
What Bloomberg Intelligence Says:
The preliminary proposal to Groupe Casino from Xavier Niel, Matthieu Pigasse and Moez-Alexandre Zouari seems to need significant support from creditors, who would have to accept a well-below par adaption of the €4.5 billion in French net debt to bring it to a level the company’s anemic cash flow could support.
— Charles Allen, BI retail industry analyst
Casino’s New €1.1 Billion Proposal Requires Debt Haircut: React
Casino’s unsecured bonds gained around 1 point, but were still quoted at below 20 cents on the euro, according to CBBT data compiled by Bloomberg.
Analysts at Spread Research suggested that Niel and his partners could have a better chance of success than Kretinsky because their offer would keep Casino in French hands. The government previously blocked the takeover of Carrefour SA by Canada’s Alimentation Couche-Tard.
Casino and its chief executive officer, Jean-Charles Naouri, have struggled for years to shore up its balance sheet, until recently agreeing to enter court-supervised talks with creditors in a process known as conciliation. Despite its difficulties, investors are vying for the owner of the Monoprix and Franprix chains, drawn in part by its network of stores in Paris and southeastern France.
While the conciliation procedure was opened in late May, talks are kicking off this week, with a meeting between the company, creditors and the French government taking place on Thursday after Accuracy did the independent business review for the company, according to people familiar with the matter. Representatives for CIRI — the arm of the French government involved in the discussions — and Casino declined to comment on this.
Read More: Why Billionaires Are Circling Debt-Laden Grocer Casino: Q&A
As investors circle the grocer, rival French retailers are also sizing up Casino. The Mulliez family, which owns the Auchan supermarket chain, approached Kretinsky for a tie-up between its French operations and Casino if his offer prevails, people familiar with the situation said last week. Carrefour is also running an analysis of the value of Monoprix stores, Le Monde reported.
--With assistance from Giulia Morpurgo and Julien Ponthus.
(Updates with details about the talks with creditors and French government. An earlier version misspelled Niel in deckhead)
Author: Angelina Rascouet and Irene García Pérez