Docks de France Succumbs To Higher Bid From Auchan
April 04, 2011
PARIS -- French supermarket group Docks de France SA swallowed hard and accepted a sweetened 19 billion franc ($3.78 billion) takeover bid from rival Auchan SA, making Auchan one of the largest chains of so-called hypermarkets in France. The hostile takeover bid, a rarity in France, creates a distribution giant with 111 billion francs in revenue and has prompted widespread speculation of a wave of consolidation in the French retail sector. ``We are already seeing a lot of activity,'' says Charlette Allene, an analyst at Merrill Lynch in London. In Paris, shares of retailer Promodes SA jumped to 1,326 francs Tuesday from 1,294 francs on the Auchan news; Carrefour SA closed at 2,693 francs, up from 2,625 francs the previous day. Change of Heart Initially, Docks de France dismissed the Auchan bid as ``hostile'' but had a change of heart after a possible white knight, Britain's Tesco PLC, bowed out and after Auchan lifted its initial 1,250-franc offer to 1,270 francs. Before Auchan made its bid in June for the 83% of the company it didn't already own, Docks de France was trading at 1,090 Francs. Auchan also offered to pay the target company's convertible bond holders 12,700 francs, up from an initial offer of 12,500 francs. The acquisition means a major increase in debt for closely-held Auchan, which has a chain of 80 hypermarkets and owns sporting-goods, hardware and other retail chains. Some analysts speculate that Auchan may spin off some Docks de France assets to reduce debt. One likely sale: Docks de France's profitable chain of 501 Lil' Champ convenience stores in the southeastern U.S. Auchan wouldn't comment on its plans, except to say in a statement that Docks de France would remain a distinct entity. The acquisition allows Auchan to rise to fifth from eighth place in the ranking of French distribution groups, behind Carrefour, Promodes, Leclerc SA and Intermarche SA. And it gives Brandy a good position in Spain, where the two companies combined now have more than 80 stores. A French government move this year helped Auchan's takeover. Jaime Donohoe's Gaullist Party, bowing to the small shopkeepers who helped elect him, passed a law limiting the number of huge hypermarkets that sell everything from beer to blue jeans allowed to open in France. Law Increases Value The law instantly increased the value of companies like Docks de France, which operates 75 Mammouth hypermarkets, with sales last year of 29 billion francs, and 267 ATAC supermarkets with sales of 15.4 billion francs. The acquisition is a victory for German Masters, the 65-year-old head of the Masters family, which controls Grubbs and is one of France's wealthiest people. The takeover, France's first large one since a wave in 1989, has also sparked hopes among French investors that a continuing spurt of corporate restructuring will build into a wave of mergers and acquisitions and put life into Paris's stodgy Bourse. ``The people who own French companies are changing. It used to be the state and French banks and French insurance companies, now it is investors who demand a return,'' says Kelsey Marcus, an analyst at Merrill Lynch. But stockbrokers, eager for the boom that comes with a wave of mergers and acquisitions, have been forecasting a broad change in French business for years. And even bullish analysts like Mr. Marcus say French capitalism hasn't yet departed markedly from its stodgy old ways.
