JV Partner Majid Al Futtaim Buys Out Carrefour

In a move that comes as a bit of a surprise, Carrefour has sold its 25% stake in its Middle East and North Africa (MENA) joint venture to its partner Majid Al Futaim (MAF) for AED2.5bn (EUR530mn). While it is true that Carrefour has clearly been focusing on trying to rejuvenate its French business , and to that end has been enjoying some success under the leadership of Georges Plassat after he assumed the reigns back in the summer of 2012, Carrefour international divestment strategy over this period has generally focused on markets where it was not a market leader.

Ultimately likely factors that may have driven this decision include the price on offer and the strategic initiative to close the doors on non-core emerging markets if attractive value can be extracted from would-be buyers. What seems likely going forward is that we will see a Carrefour that focuses mainly on France, Brazil and China while also maybe keeping hold of its positions in the likes of Turkey. Compared to many of these growth markets , the MENA region is simply not as exciting, notwithstanding the theoretical potential of markets such as Egypt.

France Stagnant
Selected Carrefour Markets Total Mass Grocery Retail Sales (US$bn) - Historic & Forecast
A Lot Smaller Than The Big Three: France, Brazil and China
Selected MENA Markets Total Mass Grocery Retail Sales (US$bn) - Historic & Forecast

Carrefour and MAF established their venture in 1995 and it has grown to nearly 100 stores across the hypermarket and supermarket formats. Under the agreement, MAF will retain a franchise agreement with Carrefour until 2025 so the stores will retain the popular Carrefour banner until then . What is clear though is that the next phase in growth for retailing in MENA is going to involve a lot of spending in North Africa . In more established markets such as the UAE and Saudi Arabia, and in the wider Gulf Co-operation Council (GCC) region , there is not much room for growth in food retailing . Although the likes of Qatar and Kuwait are extraordinarily wealthy on a per capita bas is , they have very small populations and scale is of course extremely important in a high volume industry like food retailing.

We would not go as far as to say that Carrefour leaving is a bad sign for MENA retailing as there are more company specific factors at play here. Georges Plassat has taken a very proactive position on Carrefour's international business and his methods do appear to have been working as t he improvements that have been taking place in France have been restoring confidence (shares up 22% so far this year) in a company that seemed to be going from one low to another post 2008 up until Plassat took over. In what has to be a more ruthless view on international markets for food retailers like Carrefour where there has been trouble at home, the cost of not being in MENA is not nearly as high as not having a presence in the likes of Brazil or China , so in this respect it does make sense to streamline abroad while focus sing on the core issue of France, which is ultimately what drives its share price.

MAF is very keen to establish in Egypt , and is reportedly mov ing closer to buying the Mansour Group 's Metro supermarket chain in the country ( see ' MAF Signals Post-Revolution Promise ' , May 22 ) .


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