Alimentation Couche-Tard’s $25-billion potential play for French-based grocery chain Carrefour SA is getting a thumbs down from its own investors and skeptical analysts.
The Quebec-based company’s shares plunged 10.5 per cent, or $4.35 at $36.96 in midday trading on the Toronto Stock Exchange.
Analysts questioned the rationale for the non-binding takeover offer at a price of 20 euros ($30.88 Cdn) per Carrefour share.
Peter Sklar of BMO Capital Markets said there’s “limited strategic rationale” for such an acquisition.
“We are skeptical that an acquisition of Carrefour by Couche-Tard or a combination of the two companies will come to fruition due to a number of considerations,” he wrote in a report.
‘A bit of a headscratcher’A more compelling transaction, he said, would be to pursue Carrefour’s 7,700 global convenience stores.
Derek Dley of Canaccord Genuity called it a “questionable pivot.”
“We view the transaction as a bit of a headscratcher, as it would involve Couche-Tard partially departing from its core competencies of c-store and fuel retailing (which garner higher trading multiples) and instead venturing into the lower-multiple grocery business, which we believe would be viewed negatively by investors,” he wrote.
Dley added that the minimal geographic overlap and a challenging operating environment in France suggest that cost savings would be lower …
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