French billionaire Bernard Arnault and Colony Capital have purchased a 9.8% stake in Carrefour, valued at about EUR4bn (US$5.2bn). It has been reported that the investors are going to take an active role in the management of the world’s second largest retailer.
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The news has prompted renewed speculation that a takeover bid for Carrefour could be on the horizon. Such rumours have helped to lift Carrefour shares by 20% this year. Carrefour shares fell 0.35% to EUR53.71 at time of press, having previously jumped to their highest levels since 2002, giving the company a market value of about EUR38bn.
Carrefour has struggled to retain its French market share in recent years, losing out to discounters and rival supermarket groups, such as Casino Guichard-Perrachon. Throughout 2005, CEO Jose Louis Duran cut prices to woo back customers, putting pressure on margins. However, in January the company reported disappointing sales results with total sales at stores open a year or more falling by 1.5% and French same-store sales declining 2.3%.
“Arnault probably thinks that Carrefour passed its lowest point and will find dynamism in the years to come,” said Guy Francheteau, an analyst at Fideuram Wargny Securities. “I think it’s a financial investment for four to five years. He chose this timing to enter at the low point in the cycle.”
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