Carrefour Pressured to Monetize $28.6 Billion Store Portfolio

New York Times - March 23, 2007

Carrefour, Europe’s answer to Wal-Mart and the world’s second-largest retailer, is in play. Last month, the American real estate investment firm Colony Capital and the richest man in France, Bernard Arnault, announced that they had acquired nearly 10 percent of Carrefour’s shares and hoped to translate that value into a fat capital gain.

Late last year, the investment group invited Mr. Arnault to join it in buying a stake in Carrefour with an eye toward capturing some of its hidden value. Mr. Arnault, worth $26 billion, is chairman of the fashion house Christian Dior and the luxury goods conglomerate LVMH Moët Hennessy Louis Vuitton.

Colony Capital and Mr. Arnault are now talking to various members of the Halley family. They have been tight-lipped about their intentions. Colony Capital and Mr. Arnault have asked for two seats on Carrefour’s nonexecutive supervisory board, and the Halley family, which already has two seats on the seven-member board, asked for an additional seat of its own.

With interest rates low, property prices high and retail profits under pressure, aggressive investors are focusing on big retail chains across Europe because their depressed stock prices do not reflect the value of their real estate holdings.

Commercial real estate values in France have soared, even as the profit margins of retailers thinned. So while Carrefour’s stock price steadily lost half of its value since 1999, its underlying value — literally — has continued to swell. Now worth as much as 21.5 billion euros ($28.63 billion), according to Morgan Stanley, the real estate is too ripe to ignore.

Colony Capital has been active in France before. In May 2005, the firm invested 1 billion euros in Accor, the hotel and restaurant operator, helping the company build the value of its real estate. Accor’s stock price has nearly doubled since then.

If Colony Capital and Mr. Arnault are to get seats on the supervisory board, resolutions must be presented to shareholders three weeks before the company’s next shareholders meeting on April 30. Sphere: Related Content