Carrefour mulls €2bn takeover bids
discount stores, after months of rumours and disappointing regional
results.
The world's second largest retailer confirmed on Tuesday it would sell the 32-strong chain, following poor annual returns from the region that contributes only two per cent to the firm's global income.
Along with local companies Lotte, Shinsegae and E-Land, retail giant Tesco has made an offer, which may push up the asking price.
The stores are currently thought to be worth 1.8 trillion South Korean won - around €1.5bn - but this could increase as competitors strive to build their market share of the €97bn industry.
Carrefour's South Korean discount store format failed to impress consumers, bringing in less than two per cent year-on-year revenue growth.
It's decision to pull out echoes a similar situation in Japan last year, and indicates a global strategy focused on emerging markets rather than more mature retail environs.
It is thought the firm will redirect funds raised from the sale to China to continue a massive expansion plan, opening 28 hypermarkets in the region each year until 2008.
This follows news that although the company is struggling to maintain minimal profit growth levels in its domestic market, it has €10bn ear-marked for global expansion, causing jitters among some analysts.
Consequently both Fitch Ratings and Standard and Poor's have downgraded the chain, citing the decline in its domestic hypermarket performance as a serious concern, even though the company has slashed prices to remain competitive.
"Carrefour's new CEO has defined a strategy that focuses mainly on price competitiveness and store openings to fuel top line growth. Although economies of scale are often described as the key for success in retailing, it is likely that the price investment and required capital expenditure will hurt free cash flow for the sake of increased sales," said Frederic Gits, senior director in Fitch's European corporate team.
The French retailer confirmed in a statement it has received numerous offers, but declined to give further details. But the successful bidder is expected to be announced within the next few days.
