Six and a half billion euros. This is the amount of debt owed by the retail giant Casino. Unable to meet its debts, the group has just entered a conciliation procedure. What are the reasons for this meltdown? AURIS Finance, a consultancy specialising in mergers and acquisitions, provides some explanations.
What will become of the Casino Group? The French retail giant, led by its CEO Jean-Charles Naouri, is now facing a major challenge. On 26 May, the group entered into conciliation and has four months to reach a favourable outcome with its creditors. While the best way out remains an agreement to renegotiate its debt, it is highly likely that the group will have to sell some assets in order to meet its obligations.
An aggressive inorganic growth strategy
Today, the Casino Group is made up of numerous brands: Monoprix, Franprix, Vival, Spar, Naturalia, Cdiscount and LeaderPrice. This is the result of the group’s inorganic growth strategy in the 1990s, which was accompanied by a massive geographical diversification. Casino, which employs 200,000 people worldwide (including 50,000 in France), is now present in Asia, Africa and Latin America, with 240 shops in 22 countries.
A wall of debt
These acquisitions and developments were all financed with debt. But the expected profitability has not materialised. In an inflationary context, hard discounters have risen in prominence through their low-price strategy, to the expense of more traditional retail companies. In a highly competitive market, the Casino Group has carried out a series of divestments to reduce its debt: in 2016, the group sold its subsidiaries in Thailand. Three years later, Casino also sold 26 hypermarkets and 67 Monoprix stores. However, these measures proved insufficient. In 2019, a first safeguard procedure was initiated, resulting in the sale of the Leader Price shops to the German Aldi. The value of the group’s assets no longer covered its outstanding debts. For the first quarter of 2023, the retail group published poor trading results: supermarket sales fell by 7.8% and those of its hypermarkets by 12.4%. A situation that puts the group’s creditors in a strong position.
Will Casino have to sell off assets?
The conciliation procedure could lead to a renegotiation of the debt, coupled with the sale of certain assets. Two players are currently lining up for a possible takeover: Czech billionaire Daniel Kretinsky and the Teract retail network. On 24 April, EP Global Commerce, Daniel Kretinsky’s investment fund, proposed a capital increase of €1.1 billion. The offer was clearly conditional on “a significant reduction in the group’s gross unsecured debt”. This unsecured debt currently stands at €3.6 billion. Teract, the garden centre and food retailing arm of agribusiness group In Vivo, also intends to play a role in the negotiations. In March 2023, Teract signed an exclusive agreement with the Casino Group to set up joint supply chains.
Our experts at your side
The Casino Group’s upcoming moves will undoubtedly have an impact on the entire value chain, from producers to suppliers. AURIS Finance’s experts are specialised by sector. They can help you develop a long-term strategy and advise you on your acquisition and sale projects.
