Billionaires Play Their Cards for France’s Casino

Two billionaires have put their cards on the table at Casino Guichard-Perrachon SA.

The rescue of the heavily indebted French grocer may look like Czech investor Daniel Kretinsky’s to lose. But this is a highly political situation involving thousands of French jobs. Even if he brings a more credible financial offer, he could miss out to French rival bidders.

To recap: Casino, controlled by Jean-Charles Naouri, operates the Monoprix and Franprix retail chains but is laboring under French debt of €4.5 billion ($4.9 billion) despite selling €4.1 billion of assets over the past five years. Consequently, it has begun court-supervised talks with creditors to cut its borrowings.

Two investor groups have put forward rescue proposals alongside the group’s own plan. All would see Naouri lose control of Casino, bringing an end to his ownership which involved a convoluted corporate structure.

In financial terms, the proposal from Kretinsky, who owns 10% of Casino and is teaming up with fellow investor Marc Ladreit de Lacharriere’s Fimalac, looks to be the most compelling. This plan would inject €1.35 billion into Casino, including €860 million from Kretinsky and Fimalac, €290 million from secured creditors and €200 million from shareholders. Some €3.5 billion of unsecured debt and €1.5 billion of secured debt would be converted into equity. This would see Casino’s gross debt cut to €2 billion, roughly three times earnings before interest, tax, depreciation and amortization of €650 million.

The rival offer from a group known as 3F, led by three French businessmen — telecommunications billionaire Xavier Niel, banker Matthieu Pigasse and retail entrepreneur Moez-Alexandre Zouari, proposes a €900 million injection, but only half would of this would be equity, of which Niel, Pigasse and Zouari would contribute €175 million. The remaining €450 million would be provided by secured creditors in the form of new super senior debt. It would also convert €3.5 billion of unsecured debt into equity, but it would convert only €300 million of secured debt, leaving Casino with about €3.7 billion of gross debt. And 3F’s proposal is still subject to due diligence, while Kretinsky’s is not. 

Each plan would see the investors take control of the group and leave existing shareholders with almost nothing. That explains why Casino shares fell as much as 42% on Wednesday, to a fresh low of €2.6, although they have recovered slightly.

But financial considerations are not the only aspects at play. Casino has more than 50,000 employees in France. The company is also crucial to French food security. 

Both bidders have agreed to keep Casino’s headquarters in Saint-Etienne, a town south-west of Lyon. But 3F has also pledged to keep the same level of employment in the core group, while Kretinsky hasn’t made an explicit commitment, Casino said.

Secured creditors, including the French banks that have long supported Casino, will see a relatively small chunk of their holdings converted into equity under the 3F plan, but they will have to weigh how comfortable they are with their notes becoming junior to the new class of super senior debt. And, of course, 3F’s plan would enable Casino to remain in French hands, which may be more palatable to politicians. 

Casino will put forward the favored proposal to the court by the end of this month, weighing each against its own plan for a €900 million debt for equity swap.

Given the uncertainty over the company’s future, rivals, such as Carrefour SA and the Mulliez family, which owns the Auchan supermarket chain, have a duty to see if they can pick up Casino’s quality assets, primarily the Monoprix and Franprix convenience businesses.

And although it looks increasingly likely that Naouri’s Rallye SA, which owns 52% of Casino, will lose control of the food retailer, the French businessman always seems to have one more gamble up his sleeve.

A role for Naouri in the company going forward is said to be irrelevant to Casino’s decision on which plan to propose to the court. But under pressure, a left-field effort to wrestle back the retailer can’t be ruled out.

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To contact the author of this story:

Andrea Felsted[email protected]

To contact the editor responsible for this story:

Nicole Torres[email protected]