Auchan would have a lot more to gain from a potential tie-up with Carrefour, Barclays has suggested, benefiting from the latter's more advanced digital strategy, more diversified portfolio, and better price positioning.
This would likely be a 100% cash offer, according to a report in Les Echos.
While there is no evidence that this will happen, nor confirmation from either party that a bid is in the offing, Barclays suggests that Auchan would potentially benefit more from any proposed deal.
'Could Derail Carrefour's Recovery'
Barclays analysts Nicolas Champ and James Anstead said in a briefing note that a potential merger with Auchan could 'derail Carrefour's ongoing recovery in France', while also increasing its exposure to the hypermarket format in France to an estimated 60%, up from the current 50%.
According to the bank, the merger would deliver potential synergy savings of around €930 million, or 0.9% of combined sales, reflecting 'uncertainty over levels of required disposals'.
This is lower than the synergy savings recouped from the 2016 merger of Ahold and Delhaize, which totalled 1.2% of total sales (€750 million), the authors note.
'Besides, it is possible that part of any savings would be reinvested to improve Auchan's price positioning and accelerate its online strategy,' they state.
Competition And Antitrust Concerns
It is also likely that any proposed deal would be placed under significant scrutiny by the French government, and be red-flagged over antitrust concerns. The authors note the proposed bid by Canada's Couche-Tard for Carrefour last year, which was spiked by French authorities.
As the authors put it, it is 'difficult to quantify the likelihood of this potential tie-up happening', especially before the French presidential and parliamentary elections, which take place in April and June respectively.
Carrefour is due to report its full-year results on 16 February, at which it is likely to report 'improving' results, as well as an 'ambitious FCF generation target for this year', Barclays suggests.
As Bloomberg noted in January, commenting on a potential deal, 'Securing a deal would involve the buyers making compromises. A willingness to do so suggests some desperation to get a transaction done.'