Auchan-Carrefour: the secrets of the “Merlot” project
The Lazard bank is trying to convince investment funds to finance the takeover of "Sauvignon" on "Pinot" to create a leader in distribution. The key is the promise of nearly 1.2 billion euros in synergies.
Is it possible, by assembling pinot and sauvignon, to obtain merlot? Whether in Burgundy or Bordeaux, winegrowers and varietal experts doubt it. But the alchemists of the investment bank do not despair of achieving it.
In mid-November, those of Lazard made the promise to investment funds. Objective: to convince them to finance the takeover of Carrefour (baptized “Pinot” by Lazard) by Auchan (“Sauvignon”). "Merlot would become the leading distributor in France with more than 29% market share in France and a unique international presence in 17 countries", they wrote on November 12, 2021 in a document sent to the largest investment funds, and that Le Figaro was able to consult.
A marriage project between Auchan and Carrefour had been closely studied by the leaders of the two distributors at the end of the summer and the beginning of the fall. At the time, it consisted of the takeover of Carrefour by Auchan, for a price of 21.50 euros per share, paid 70% in cash and 30% in shares of the new entity. But Alexandre Bompard, the CEO of Carrefour, abandoned the negotiations on October 7, even before receiving a formal offer. Its first shareholder, the Moulin family (11%), was only ready to accept an offer fully paid in cash, and at 22 euros. An investment of 17 billion euros unaffordable for the Mulliez Family Association (AFM), which owns 97% of Auchan.
The AFM management board did not allow itself to be destabilized by this rebuff. He asked his investment banker to continue looking for solutions to make the marriage possible. Lazard has therefore produced, in a few weeks, a 16-page document in English, which is intended to serve as the basis for an oral presentation to the funds. Its objective is then to achieve a closing of the operation at the end of 2022.
The promoters of the Merlot project estimate that the new group will achieve in 2025 a turnover of 108 billion euros and a gross operating surplus (Ebitda) of 8.6 billion. The margin would then be 7.9%, compared to 6.1% in 2020. An increase largely enabled by operational synergies (purchases, head office costs, logistics, etc.). Without detailing them and even less mentioning their social impact, at least in its written document, Lazard figures these synergies at 1.165 billion euros per year from 2025; their implementation cost would be 1 billion euros, spread over 2023 and 2024.
Project not yet mature
To convince the anti-competitive authorities, the promoters of the Merlot operation plan to sell 370 stores, including 144 hypermarkets, with an impact of 9.2 billion euros on turnover and 300 million on EBITDA. In addition to France, where the duplicate stores are mainly located in the North, the two groups are both present in Spain, Romania, Poland and Taiwan. Lazard hopes to make around 900 million from this sale.
Could a single buyer be interested in this international complex? Some players in this complex case are convinced of this. “Lazard is trying to build a project at Veolia, which revealed the name of the future buyer of the French activities of Suez the same day it announced its takeover project for Suez,” said one of them. "2MX, the Spac created at the end of 2020 by Matthieu Pigasse, Moez-Alexandre Zouari and Xavier Niel, would be the ideal buyer of the assets to be sold following Auchan's takeover bid on Carrefour", assures another.
On paper, the Merlot project is enough to make investment funds salivate. It remains to negotiate the financial package, which is more complicated. On the one hand, before investing alongside the AFM in a takeover bid on Carrefour, the funds must agree on the value of the Auchan group, which is not listed on the stock exchange; this complexity contributed to the breakdown of negotiations in October. On the other hand, even before entering the new group, the funds envisage their exit within five to seven years. Within the AFM, this prospect contributes to doubt some, who refuse the idea that the Mulliez family must end up leaving distribution one day.
The Merlot project is therefore far from being ready to drink, especially since many consider it unthinkable to announce it before the presidential election. But discussions continue behind the scenes between Lazard and the investment funds. After a few more months of maturation in the cellar, the Pinot-Sauvignon blend could end up becoming a reality.