Carrefour eyeing Brazil listing to fund expansion

Customers browse goods on display inside a Carrefour supermarket in Cyprus. A top official of the Europe’s largest retailer yesterday said it looks to accelerate growth in a key market through an IPO in Brazil.

Reuters

Paris

The appointment of a financial and IPO expert to head its Brazilian operations signals Carrefour  may list a stake in that business, as Europe’s largest retailer looks to accelerate growth in a key market without adding to its debt.

With its core French business on the mend, Carrefour chief executive Georges Plassat has said he wants to speed up expansion in the fast-growing emerging markets of Brazil and China, but has yet to say how.

In October, Plassat signalled he was gearing up for an offensive in South America’s top economy by naming 56-year old Charles Desmartis to head the holding company controlling all of Carrefour’s Brazilian operations.

Desmartis’ mission is to renovate an ageing store network and take on competitors Grupo Pao de Acucar (GPA), owned by France’s Casino, and Wal-Mart. But after a big drive to cut Carrefour’s debt, Plassat is anxious that any extra investment does not drive borrowings back higher, leading to speculation of a partial listing in Brazil.

“They must accelerate in Brazil without weighing on the balance sheet. The idea would be that Brazil finances itself,” said Raymond James analyst Cedric Lecasble.

“Any solution that would combine an acceleration in Brazil with a solid balance sheet would be well received by investors.”

Desmartis’ experience in spearheading the initial public offering (IPO) of Schlumberger’s smart card unit Axalto in 2004 and as head of Carrefour’s financial controls since 2011 has added to speculation that a Brazilian listing is in the works.

“Things are heating up in Brazil. I think an IPO could take place within six months, provided there is no big macro-economic incident,” said another analyst, who asked to remain anonymous.

Carrefour declined to comment.

The French group would not be alone to float assets next year as German rival Metro aims to list up to a quarter of its Cash & Carry Russia business in London by the second quarter of 2014, according to sources.

Plassat, who has said that an IPO is a funding option among others in Brazil, has already shown a taste for plans that involve minimal levels of new financing, having struck a deal with investors earlier this month to buy a string of shopping centres at little cash cost to Carrefour.

Brazilian business magazine Exame also said in October that Carrefour had mandated bankers to prepare for a possible Brazilian listing.

Analysts estimate Carrefour’s Brazilian business is worth about €7-9bn ($9.6-$12.3bn) and suggest the company might float a 25% stake. Other options include listing only property assets and/or finding local partners.

Under Plassat, who took over as CEO in May 2012, large scale asset sales helped Carrefour cut net debt to €5.9bn at end-June 2013 from €9.6bn at end-June 2012.