European retail giant Carrefour received a surprise merger approach from Canadian convenience store operator Alimentation Couche-Tard, pushing shares of the French company up 13% on Wednesday.
Alimentation Couche-Tard Inc. and Carrefour SA, both of which have retail portfolios spanning the globe, are in "friendly" talks about a potential combination. France has been one of Europe's toughest retail markets, with subdued economic growth curbing consumer spending while intense competition among grocers has squeezed pricing and margins.
"Given the nature and location of ATD's business, we see little potential for synergies", Citi analysts said, adding that fierce competition makes France a particularly hard market.
Representatives for Carrefour could not immediately be reached for comment.
Couche-Tard entered the Asian market in November through a deal to buy Convenience Retail Asia Ltd's Hong Kong unit for HK$2.79 billion.
Couche-Tard, whose banners include Circle K and Corner Store, said that it recently submitted a non-binding offer letter to Carrefour SA for a "friendly combination" at a price of €20.00 per Carrefour share. It is also the leading private employer in France. Convenience-store operators have been expanding into the supermarket industry, including in the United Kingdom, where TDR Capital teamed up with the gas-station entrepreneurs behind EG Group in October to acquire a majority stake in grocer Asda from Walmart Inc.
"If the potential transaction were only for Carrefour's convenience segment, we could better understand the strategic rationale", analysts at Raymond James said of Couche-Tard's approach.
Carrefour has held up fairly well during the pandemic.
In 2018, Carrefour and its French rival Casino were locked in a dispute after Casino said it rejected a merger approach that Carrefour denied having.