New Delhi:Reliance Industries Ltd is interested in acquiring a stake in Europe’s biggest retailer, Carrefour SA, people familiar with the thinking at India’s largest conglomerate said. According to a report by news agency AFP, a Carrefour spokesperson “formally denied” that the company was in talks with Reliance.
People familiar with the development further claimed that Reliance, through its investment bankers, is considering acquiring stakes in J Sainsbury’s Group Plc. or Australia’s Cole’s Group Ltd, as Plan B, should the overture to Carrefour fail. Both Sainsbury’s and Coles are being wooed by private-equity firms that wish to acquire them.
A spokesperson for Sainsbury’s declined comment. A Reliance spokesperson also declined comment. And Coles spokespeople could not be reached.
It is unclear if a stake in Carrefour is up for grabs, but an audacious move such as this, if successful, could help Reliance, which is rolling out a big chain of stores in India, but has limited experience in the business. It could also open an international pipeline for the local products the company sells through its stores, especially fresh produce. Reliance has announced an ambitious Rs25,000 crore plan to roll out as many as 6,800 stores in the country, selling everything from fresh foods to furniture.
Paris-based Carrefour has been in the spotlight after French billionaire Bernard Arnault, who owns the luxury brand LVMH, and Colony Capital bought 9.8% of the company for about €4 billion (Rs23,362 crore).
Carrefour’s chairman Luc Vandevelde quit on 7 March to be replaced by Robert Halley, whose family is the company’s biggest investor—controlling a 13% stake and the supermarket’s voting rights. A purchase of that stake could cost a buyer Rs30,990 crore, if valued at the same price at which Arnault bought his stake.
The people familiar with the development also said Reliance’s global shopping trip, or attempt at that, was motivated by several factors, including obtaining the expertise to roll out its own retail chain in India. Still, at current valuations of Carrefour, the deal will come at a steep price, and cost Reliance more than it plans to spend in its entire roll out. A purchase of an international retailer could also give Reliance instant access to a pool of global suppliers.
Carrefour, which translates into Crossroads, after the location of the company’s first store which opened in France at the intersection of five roads in 1963, currently operates 12,000 stores under a raft of names ranging from Marche Plus to Dia. Its domestic expansion has been stymied from a law barring it from opening new stores in France, so smaller shop owners can be protected. That’s forced it to expand to markets such as China, where it is the country’s No.3 foreign retailer.
In India, investments in retail from large companies such as Reliance and rival Bharti Enterprises, are under similar scrutiny after the government said it was studying the effect of large retailers on small shopkeepers. Bharti has said it is teaming up with Wal-Mart Stores Inc. for managing the back-end operations of its own retail initiative.
Sainsbury’s is the UK’s third largest grocery retailer and runs 770 outlets in the country. The Sainsbury family trust holds about 14% of the company and insurer AxA owns another 15%. Private equity firms led by CVC Capital Partners are currently bidding for Sainsbury’s.
Coles, which put itself up for sale last month after rejecting a A$18.2 billion (Rs63,700 crore) offer by private equity firm Kolhberg Kravis Roberts & Co., operates about 2,000 outlets in Australia and New Zealand. The company that was previously called Coles Myres sold the Myres stores last year and changed its name to Coles to reflect that.
Shares of Carrefour have risen 11.2% to €48.99 in a month, while Sainsbury has gained 3% to 530.25 pence in the same period. Coles shares have risen 5.5% to A$14.72 in a month.
C.H. Unnikrishnan, Ravi Krishnan and Rasul Bailay contributed to this story.