Duster340 wrote: Carrefour shares trade at a discount to its European competitors and its weak share price has likely increased the appeal of a company that Couche-Tard might not have touched even five years ago. Couche-Tard chairman and founder Alain Bouchard will try to rally support for a sale from Carrefour’s long-suffering shareholders, including French billionaire Bernard Arnault, Brazilian billionaire Abilio Diniz and France’s Moulins family.
The family of Mr. Arnault, founder of luxury good empire LVMH, owns 5.6 per cent of Carrefour stock and has been invested since 2007, when it bought into Carrefour with U.S. private equity group Colony Capital. At the time, the partners called their investment “strategic, industrial and long-term.” Since then, Carrefour’s stock price stock has fallen from €55 to €15.47 before the talks were confirmed as its chief executive tries to execute a turnaround.
Purely on a financial basis, Couche-Tard appears to be seizing on an opportunity to boost its profits cheaply – at least relatively speaking. Because of Carrefour’s woes, the company’s stock price has continued to fall for the past five years. Couche-Tard, meanwhile, has seen big market gains, and it trades at a higher multiple to its earnings.
As of Tuesday’s market close, before any merger talks were confirmed, Couche-Tard’s enterprise value amounted to 9.4 times its estimated earnings before interest, taxes, depreciation and amortization (EBITDA), according to analysts at RBC Dominion Securities. Carrefour’s equivalent multiple is roughly seven times EBITDA after factoring in the 29-per-cent premium Couche-Tard has said it is considering paying.