The Fate of French Food Retailer Casino Hangs in the Balance as Teract Talks Collapse
The fate of French food retailer Casino hangs in the balance after talks between the group and minor rival Teract collapsed due to a competing offer by billionaire investor Daniel Křetínský and the company’s deteriorating financial position. In late May 2019, Casino entered into voluntary negotiations with its creditors to restructure its debt – a conciliation procedure that will last several months and see the company try to negotiate a solution for both its debt and a fresh injection of liquidity from investors like Křetínský.
Now a trio of prominent French businessmen, including telecommunications billionaire Xavier Niel, are working on a plan to bail out the struggling retailer. They are working on a new offering that rivals Křetínský’s and are reportedly looking for partners among lenders and hedge funds. The businessmen are shareholders in Teract, and in separate statements both Casino and Teract said on 20 June 2019 that they were ending their exclusivity negotiations in light of the trio’s new bailout plan. The plan includes measures to strengthen Casino Group’s equity and, where necessary, adjust its existing debt to its current capabilities and preserve its growth potential.
Casino’s Struggling Financial Position
Casino and its parent companies have €4.9bn of debt repayments to make by 2025 and credit rating agencies wonder if the group will be able to manage these repayments. The company’s liquidity is weak, and its capital structure is increasingly unsustainable. Moody’s believes that a default is likely to happen within the next 12 months given its liquidity constraints. In an effort to reduce the level of debt, Casino agreed to sell stores with around €1.6bn in annual sales to retail company Groupement Les Mousquetaires, which runs the Intermarché supermarket chain.
Casino’s lack of liquidity and unsustainable capital structure are causing alarm among investors, but the company’s majority shareholder, Jean-Charles Naouri, is trying to preserve most of the company he has spent years building things to debt-fueled buyouts. He is likely to lose control of the group if the bank leaves with a large cash injection. Casino’s sixth largest food retailer faces an uncertain future, along with the approximately 53,000 employees it has in France, with many more working for the company globally.
Summary
Talks between French food retailer Casino and rival Teract have collapsed in the wake of an offer by billionaire Daniel Křetínský and the companies’ deteriorating financial position. Now a trio of prominent French businessmen, including telecommunications billionaire Xavier Niel, are working on a new bailout plan for the heavily indebted retailer that includes a measure to strengthen Casino Group’s equity and adjust its existing debt to its current capabilities. Casino has €4.9bn of debt repayments to make by 2025, which credit rating agencies believe may not be manageable, and efforts have been made to reduce the level of debt through the sale of stores. Casino’s lack of liquidity and unsustainable capital structure mean the company is facing a potentially uncertain future, along with its employees.
Additional Section
The struggling financial position of Casino Group highlights the importance of effective risk management for retail companies. Managing the risks and opportunities presented by economic factors such as foreign exchange, GDP growth, consumer price index, and inflation can be critical to the survival of an organization, especially in highly competitive industries. One way organizations can manage their risk is through effective diversification.
Diversification is a strategy of spreading risk across different assets, recognising that the performance of one asset might not be aligned with the rest of the portfolio. A diversified portfolio affords greater security by reducing the risks of investment loss, and it allows retail companies to hedge against any market downturns. The value of diversification in risk management came to the fore during the financial crisis of 2007-2008, with individuals and organizations seemingly overexposed to certain asset classes and suffering enormous losses.
However, diversification also presents challenges. It can be challenging to identify the right mix of assets that provide the maximum risk-adjusted return because diversification is not a one-size-fits-all strategy. Additionally, excessive diversification dilutes the potential returns of any one asset. Furthermore, larger and more diversified organizations can be harder to manage effectively, with more complex organizational and communication structures.
Therefore, diversification is just one strategy of many that a retail company can undertake to manage risk. An organization’s unique circumstances will determine the effectiveness of any risk management method. When conducted effectively, diversification can help organizations survive difficult times and remain competitive in their sector. It can be the difference between companies that thrive, and those that flounder in choppy waters.
Conclusion
Casino Group’s financial position hangs in the balance after talks with Teract collapsed, and a new bailout plan is in the works. The situation highlights the importance of effective risk management in the retail sector, as organizations need to manage the risks and opportunities presented by different economic factors. The diversification of assets is just one strategy that retail companies can undertake to manage their risk, and when conducted effectively, it can help organizations survive difficult times and remain competitive in their sector.
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A trio of prominent French businessmen, including telecommunications billionaire Xavier Niel, are working on a plan to bail out heavily indebted French food retailer Casino after talks between the group and minor rival Teract collapsed.
Casino and Teract said in separate statements Thursday that they were ending the exclusivity negotiations which started in early March that would combined casino French retail operation with Teract, a listed company backed by farmers’ cooperative Invivo.
The arrival of a competing offer in April a invest 1.1 billion euros in the casino led by Czech billionaire Daniel Křetínskýas well as the deteriorating operations and financial position of Casino, made the originally conceived Teract operation impossible.
To further complicate matters there was The decision of the casino at the end of May to enter into voluntary negotiations with its creditors to restructure its debt — a so-called conciliation procedure which will last for several months. Through this the company would aim to negotiate a solution both on its debt and for a fresh injection of liquidity from investors, such as Křetínský.
Now niel, retail entrepreneur Moez-Alexandre Zouari and banker Matthieu Pigasse, who are also shareholders in Teract, are trying to put together a new offering that rivals Křetínský’s. They said in a statement on Thursday that they were working on a bailout plan that would include “measures to strengthen Casino Group’s equity and, to the extent necessary, adjust its existing debt to its current capabilities and preserve its growth potential.”
They didn’t say how much money they would be willing to inject into the casino, but it seemed to signal that they were looking for partners among lenders and hedge funds. “The solution is open to all actors interested in participating in the recovery of a long-standing retailer. . . while remaining true to its history and identity,” they said.
The fate of France’s sixth largest food retailer by market share now hangs in the balance, alongside the approximately 53,000 employees it has in France, with more globally. majority shareholder of the casino, Jean-Charles Naouriit is also trying to preserve most of the company it has spent years building via debt-fueled buyouts, but is likely to lose control if a large cash injection is finalized, people familiar with the matter have said previously.
Casino and its parent companies face €4.9 billion in debt repayments by 2025; credit rating agencies wonder if these can be met. Moody’s said it believes a default is likely within the next 12 months “because the company’s liquidity is weak and its capital structure is unsustainable.”
As part of its effort to cut debt, Casino has also agreed to sell stores with around €1.6 billion in annual sales to retailer Groupement Les Mousquetaires, which runs the Intermarché supermarket chain. Casino said on Thursday the failure of the Teract talks would have no impact on the Intermarché deal.
https://www.ft.com/content/8816e6da-10f5-41a9-8812-36e5ca2e6977
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