French Supermarkets Gain Share as Wal-Mart Sets Sights on Europe

PARIS - Shares in French supermarket groups rose today after Wal-Mart, the world's biggest retailer, announced it wanted to open stores in every European country and would reach this goal through acquisitions and internal growth, Reuters reports.

Shares in Casino, France's second-largest listed retailer, soared 3.4 percent, besting a slightly weaker DJ Stoxx index of European retailers. Carrefour, the world's second-largest retailer, went up 1.3 percent, and Dutch Ahold increased 1.4 percent.

Those rises followed a Financial Times report that Wal-Mart c.e.o. H. Lee Scott was interested in opening Wal-Marts across Europe, and that the retailer's international growth would come from a combination of strategic acquisitions and greenfield expansion.

According to analysts, Wal-Mart's interest in European growth is nothing new. "It's an issue that has come up frequently ever since Wal-Mart acquired [British retailer] Asda, and they have not made any secret about their ambition to be a pan-European player," one London-based retail analyst said. "The added wrinkle this time seems to be that Wal-Mart is approaching Brussels."

Right now Scott is in the Belgian capital, where he is scheduled to meet European officials, including competition commissioner Mario Monti, according to the Financial Times. Analysts believe Lee will confer with EU authorities, as Wal-Mart did in the United Kingdom before purchasing Asda, about possible EU obstacles to takeovers and greenfield expansion.

As well as Asda in the United Kingdom, Wal-Mart has two money-losing acquisitions in the difficult German retail market. That leaves France and Italy as the big European markets most likely to appeal to Wal-Mart, but with few retailers of any size to purchase in Italy, analysts think France will be the company's first choice.

Carrefour merged with Promodes in 1999 in part to counter Wal-Mart's anticipated European invasion, but the current weak share prices of both French retailers -- which this year have trailed behind European rivals by 18 percent and 15 percent, respectively -- make both more vulnerable currently.

According to one investment banker, "There is no doubt [Wal-Mart wants] Carrefour. It makes the most sense for them. They can't do anything big in the U.K., and Carrefour gives you not only France, but southern Europe and emerging markets. Both in size and format, Carrefour works better for them than Casino."

But purchasing Carrefour, with its sales base in France and Spain, would make Wal-Mart by far the largest retailer in Europe -- a potential concern for the EU on competition grounds. A bid would also have to be hostile, making a management exit more likely and cultural issues more delicate.

Analysts say France's second-largest retailer, Auchan, might also beof interest to Wal-Mart, but Auchan's capital is privately held by an independent-minded family, so a takeover would be harder.
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