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Carrefour Investor Opposes Individual Sale of Non-EU Units

Carrefour SA investor Knight Vinke Asset Management LLC said it opposes the world’s second-largest retailer selling assets outside of Europe individually and that management should focus on improving business in the region.

“The sale of Carrefour’s non-European activities, one by one, in an isolated manner, wouldn’t seem to us to be the good solution,” the activist investor wrote in a May 25 letter to Carrefour it made public today. The Boulogne-Billancourt, France-based retailer should “stay focused on improving the performance of its core business in Europe, which is essential to re-establishing the group’s valuation.”

Knight Vinke, which owns about 1.5 percent of Carrefour, sent the letter to the company’s board following media reports the retailer had held talks with Cia. Brasileira de Distribuicao Grupo Pao de Acucar about a merger in Brazil. Pao de Acucar has denied there has been contact, while Carrefour has declined comment. Carrefour spokeswoman Florence Baranes-Cohen declined to comment on Knight Vinke’s letter.

“The terms of the project to merge Carrefour Brazil with GPA are not yet known to the market but this transaction already raises a certain number of questions that are of concern to shareholders,” Knight Vinke wrote in the letter. It added it wants to maintain a “constructive dialogue” with Carrefour’s board.

Carrefour has hired Lazard Ltd. to study a merger between its Brazilian unit and Pao de Acucar, Journal du Dimanche reported this month.

Property Listing

Carrefour this month delayed a plan to spin off 25 percent of its real estate in France, Italy and Spain following shareholder opposition led by Knight Vinke. Splitting off the division that groups the assets would make it tougher to adopt an alternative strategy should a plan to transform the retailer’s French business be unsuccessful, Knight Vinke wrote in an April 11 letter to Carrefour’s board.

The retailer has said it will continue to prepare for a listing of the business. Carrefour is also pushing ahead with an offering of 100 percent of its Dia hard-discount business in Madrid in July. Knight Vinke supports the spinoff of Dia, Eric Knight, the activist investor’s chief executive officer, said today.


Carrefour Chief Executive Officer Lars Olofsson has lost credibility with the market after two profit warnings in 2010 and the departure of two senior executives this year, Knight said. Even so, Carrefour needs stability and Olofsson leaving before he had been given a chance revive the business would be “catastrophic,” Knight said.

Knight Vinke wants to make sure “the tensions don’t destroy the company,” Knight said.

Olofsson, 59, joined Carrefour in 2009 after a decade in which sales barely rose in France, its biggest market. He’s pinning the company’s turnaround on a 1.5 billion-euro ($2.12 billion) revamp of 500 superstores in western Europe, betting a new format, dubbed Carrefour Planet, with lower prices and more own-label products will boost sales and profit through 2015. This month, he ousted the head of France and took direct control of the country after a lackluster first quarter.

Carrefour Planet

“The first priority should be to get Carrefour Planet to work,” Knight said. “Everything else is a distraction.”

If Carrefour wants to sell its international assets, it may want to consider grouping and listing them as a separate unit, Knight said. Still, Olofsson and his team should focus on turning around the retailer’s European business, he said.

Knight Vinke last year called for a breakup of Eni SpA, Italy’s biggest oil company, after building a stake. The New York-based investment firm has accumulated an 18 percent holding in Kesa Electricals Plc, owner of the Comet electronics chain in the U.K. and Darty in France, over the past year.

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