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Is Wal-Mart’s price right for Carrefour?

By Camilla Palladino

www.breakingviews.com

Rumours about a possible offer for Carrefour are stepping up a notch. And it is not hard to see why possible predators such as Wal-Mart might be tempted to circle the troubled French retailer.

Carrefour shows little sign of being able to improve its dismal performance. Its share price languishes at less than half of its late 1999 peak. The management has failed to stop a slide in like-for-like sales. The company recently cut its revenue forecasts for this year. And while Carrefour denies that Daniel Bernard, its chief executive, has been set a year-end deadline to show some improvement, his credibility is clearly at a low ebb.

The retailer is also more vulnerable to a bid following the recent renewal of its shareholders' agreement. Some of the founding families, accounting for 5% of voting rights, have withdrawn. 

Meanwhile Wal-Mart seems to be stepping up its interest in expanding in Europe. Its chief executive, Scott Lee, recently talked to the anti-trust authorities in Brussels, triggering speculation that the company is eyeing deals in continental Europe.

Carrefour could be the US retailer's ideal prize. In terms of planting flags around the globe, buying the second-largest operator after itself would provide an unrivalled opportunity for the US group.

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