Blog: Dean BestDiniz and Naouri use media to stake their claims

Dean Best | 6 July 2011

The battle over the future of CBD rumbles on.

The men leading the two warring shareholders in Brazil's largest retailer - also known by its trading name of Grupo Pao de Acucar - have both given high-profile interviews to set out what they think of the proposal to merge the company with Carrefour's local operations.

Abilio Diniz, who has played a key role in the merger plan, spoke to French newspaper Le Figaro about the combination of CBD and Carrefour's assets - a plan that has enraged Casino, his fellow shareholder in the Brazilian firm.

Diniz said the merger was a "win-win project for the Brazilian shareholders of GPA, those of Casino and those of Carrefour". The businessman said he had "a lot of admiration" for Carrefour and claimed the French retail giant "inspired him a lot" in his running of CBD.

He admitted that Carrefour's Brazilian business had lower margins than CBD but insisted the "potential for profit growth is very strong" if the French retailer's local operations could brought to the same level.

However, it was Diniz's comments on the opposition of Casino and its chairman and CEO Jean-Charles Naouri to the merger that proved interesting.

Casino and Naouri have been fiercely critical of the plan. The company has called the proposal a "long-standing, illegal, planned financial transaction" and lodged two requests for arbitration with Diniz at the International Chamber of Commerce. Naouri has condemned Diniz's "aggression" in pursuing talks with Carrefour.

However, Diniz insisted Naouri was "perfectly aware" of the Brazilian's interest in Carrefour and his interview with Le Figaro showed he believed he could win the Casino chief over. The two men are set to meet to discuss the situation on 2 August when the board of Wilkes, the holding company through which the Diniz Group and Casino run CBD, meet to discuss the situation.

"I don't think Jean-Charles will be against the project, one which is good for everyone," Diniz said. "He will look at all the different interests, for him, Casino and GPA. I plan to discuss it with and convince him. I could not imagine not doing so."

While a French publication carried an interview with Diniz, the Brazilian newspaper Valor Economico spoke to Naouri. He did not mince his words.

"The proposal made by Abilio Diniz is equivalent to an expropriation given the dilution he imposes on Casino," Naouri said. "I say again, it is unacceptable."

Naouri claimed that Diniz had "prepared for months, maybe for years at expropriating us" and told the newspaper that he first knew of the merger plan via the media.

Notably, the Casino chief then used the Valor Economico interview to move beyond criticising Diniz and explained in detail why he felt the transaction would be wrong for CBD.

"The project seems to me based on wrong strategic views," Diniz said. "First, it increases the weight of the hypermarket format in the mix of GPA, which everybody knows is a declining format. The future lies on smaller formats. It was exactly the mistake Carrefour made when it merged with Promodes [in 2000] based on unfounded synergies figures that were totally false. It will be a larger company with lower growth. The P/E ratios of the new entity will be penalised."

The future of CBD has dominated the global retail headlines in recent weeks, with claim and counter-claim. With just under four weeks before the Wilkes board is scheduled to meet, the story is likely to continue to make waves on both sides of the Atlantic.


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