Casino bidder Kretinsky wins as rival investor group drops out

(Bloomberg) – Czech billionaire Daniel Kretinsky is poised to take control of Casino Guichard Perrachon SA after a trio of French businessmen led by telecoms investor Xavier Niel pulled out of the race to the struggling grocer.

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The 3F group, which also includes banker Matthieu Pigasse and retail entrepreneur Moez-Alexandre Zouari, was competing against a consortium made up of Kretinsky and Marc Ladreit de Lacharrière’s Fimalac with offers to restructure the company’s debt and equity injection.

The French company had asked them to submit revised bids over the weekend to select a winner by the end of July. As 3F dropped out of the race on Sunday citing a worse-than-expected financial situation, Kretinsky changed the terms of the offer allowing some key lenders to get better terms after most of the company’s debt will be converted into equity.

Attestor Capital, the main secured creditor that had backed 3F’s bid, has joined the rival camp, the Niel-led group announced on Sunday. Davidson Kempner Capital Management, Farallon Capital Management, Monarch Alternative Capital and Sculptor Capital Management also support Kretinsky’s offer, a person familiar with the matter said, asking not to be named because they are not authorized to speak about it.

Casino officials Davidson Kempner, Kretinsky and Sculptor declined to comment, while a Farallon representative was not immediately available for comment. Spokespersons for Attestor and Monarch did not immediately respond to a request for comment.

The company has been seeking debt reduction through asset sales since 2018, but its focus on areas heavily dependent on tourism has backfired during the pandemic and a strategy to raise prices more than its competitors has added to the odds. Casino woes more recently.

With the company struggling to generate enough cash, Casino began court-supervised talks in May with creditors and other stakeholders, including the French state, to restructure its balance sheet. The proposals involved further equity investment by both bidders and others and the conversion of a significant portion of the company’s debt into equity.

Casino warned on July 12 that second-quarter sales plunged at its largest stores and that profits would fall 32% below expectations, adding urgency to the company’s efforts to restructure its debt. The company is also getting reduced funding from its suppliers, increasing pressures on liquidity, according to ratings firm Moody’s Investors Service.

To turn around the business, the French grocer presented a plan designed around its smaller high-end supermarkets in the city centers of the Paris and Lyon regions and on the Côte d’Azur. Even if it retains its energy-intensive hypermarket activities in France, the group plans to sell assets such as its activity in Latin America.

As part of the restructuring, existing shareholders would be left with next to nothing and Casino Chairman and CEO Jean-Charles Naouri would lose his majority stake.

(Updates with details of Kretinsky’s offer from third paragraph.)

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