Czech Investor Kretinsky Proposes €1.1 Billion Investment in France’s Casino

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(Bloomberg) — Czech investor Daniel Kretinsky proposed a €1.1 billion ($1.2 billion) equity investment in debt-laden French grocery operator Casino Guichard-Perrachon SA that could end Jean-Charles Naouri’s control over the struggling company.

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Kretinsky would invest as much as €750 million in a reserved capital increase, Casino said Monday. Under his proposal, investment firm Fimalac, another Casino shareholder, would be able to put in as much as €150 million and existing shareholders would be tapped for up to €200 million.

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Casino said it will examine the plan. Kretinsky’s proposal would include cash repurchases of Casino’s debt, converting it into equity, potentially leading to a change of control and a dilution of existing shareholders. A change of control would require a waiver from the company’s secured creditors, Casino said. 

The stock fell as much as 6.1% in morning trading in Paris.

Separately, Casino said it’s in talks with Intermarche owner Les Mousquetaires SAS to deepen their current purchasing alliance and extend it to a joint venture that Casino plans with retailer Teract SA. 

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Sealing one or both deals would mark another escape from potential disaster for Naouri, who built a grocery empire in France and Latin America over more than 30 years with generous helpings of borrowed money. The grocery titan previously saved the debt-burdened structure from collapse in 2019 by obtaining creditor protection for the holding companies through which he controls Casino. 

What Bloomberg Intelligence Says:

EP Global Commerce’s proposed €1.1 billion equity raise to rescue Groupe Casino, 57% greater than the undisturbed market value, faces multiple hurdles, with the involvement of Groupement Les Mousquetaires raising antitrust issues. The highly dilutive new equity — existing holders would only subscribe €200 million — would make a dent but not resolve the €4.6 billion French debt. The possibility of Casino’s attractive Parisian assets becoming available may entice other bidders to come forward.

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— Charles Allen, BI retail industry analyst

Kretinsky made his fortune building the largest energy group in Central Europe. Alongside his Slovak investment partner, Patrik Tkac, Kretinsky has been diversifying and taking positions in a number of European and American companies such as UK retailer J Sainsbury Plc and US sneaker chain Foot Locker Inc. He is also a minority shareholder of newspaper Le Monde and TV channel TF1 in France.

Casino aims to extend its alliance with Intermarche to 2028. Casino might sell a number of stores in France to Intermarche over several years representing a minimum of €1.1 billion in turnover.

Casino shares have lost more than half their value in the past 12 months, giving the owner of Franprix and Monoprix a market value of €702 million. The company’s bonds trade at deeply distressed levels, implying investors see a default as likely.

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Casino is considering asking for a court-appointed conciliator to oversee discussions with bank creditors and bondholders over the Kretinsky and Intermarche plans, since approval from lenders may be needed for the transactions, it said. Casino also will ask bondholders to agree that the appointment of a conciliator doesn’t constitute a default on its debt. 

The widened talks with Intermarche could lead to the creation of a retail giant capable of taking on bigger rivals such as Carrefour SA while competing with the German discounters Lidl and Aldi, which have aggressively grown market share in France’s cut-throat retail industry at a time consumers are reining in spending amid rampant inflation. The new player would benefit from Casino and Teract’s access to fresh foods, vegetables and bakeries as well as from Intermarche’s fish and meat offerings. 

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Les Mousquetaires is willing to become a minority shareholder in the new entity to be created by Casino and Teract, according to the statement. Teract’s shareholders include the giant agricultural cooperative InVivo Group, telecom entrepreneur Xavier Niel and banker Matthieu Pigasse. Les Mousquetaires and InVivo are considering an investment of invest €300 million, with Casino and Teract in ongoing talks with potential investors to pump in a total of €500 million, the companies said.

Depending on progress, the talks will be submitted for consultation to employee groups, regulators and the boards of Casino, Les Mousquetaires, Teract and InVivo, the companies said. A binding agreement between the parties could be in place before the end of the second quarter, they added.

Kretinsky already owns a 10.1% stake in Casino. 

—With assistance from Julien Ponthus.

(Updates with background on Kretinsky)