Casino Shares Surge After French Grocer Sells Stake in Big C

  • Stock advances as much as 10% in early Paris trading
  • Thailand's richest man agrees to buy Casino's stake in grocer

Casino Guichard-Perrachon SA surged in early Paris trading after the 3.1 billion-euro ($3.5 billion) sale of its controlling stake in Thai supermarket chain Big C Supercenter Pcl eased concern over the grocer’s finances.

The price paid by TCC Holding Co., a company controlled by Thailand’s richest man Charoen Sirivadhanabhakdi, was 28 percent more than the price on Jan. 14 when Casino revealed it was considering a sale.

Casino rose as much as 10 percent to 46.95 euros, the highest since Dec. 17. The stock is rebounding after falling 22 percent in December due to allegations by short seller Carson Block that the company was using financial engineering to mask a deteriorating core business. Casino has rejected the claims and said the Big C sale will cut its debt in half, putting it on track to reach a goal of raising 4 billion euros through asset sales this year.

“The valuation should be a positive surprise to the market,” Fabienne Caron, an analyst at Kepler Cheuvreux, said in a note. The price and speed of the divestment “could lead to a short squeeze” on the stock.

The shares were up 3.3 percent at 44.06 euros as of 11:54 a.m. Big C stock jumped 9.7 percent to 249 baht in Bangkok, the highest close in about a year.

Big C

TCC agreed to buy the stake in Big C for 252.88 baht a share, 11 percent higher than the Thai grocer’s Feb. 5 closing price. Big C runs more than 700 stores, ranging from hypermarkets to convenience shops.

Casino said the transaction will reduce debt by 3.3 billion euros, including Big C’s borrowings. The grocer is “very confident that it can execute the debt-reduction plan completely or even exceed the goal,” Chief Financial Officer Antoine Giscard-D’Estaing said in a phone interview. The retailer is also selling a business in Vietnam, which analysts at Kepler value at 740 million euros.

The Big C sale highlights Casino’s commitment to maintaining an investment-grade credit rating, Caron said. Standard & Poor’s said last month that the grocer’s BBB- long-term rating is on negative watch as its profitability will continue to be fairly weak for an extended period of time and its debt levels are too high. The rating may be cut as much as two levels, according to S&P.

TCC wasn’t the only one interested in buying the Big C stake. Central Group, backed by Thailand’s Chirathivat family, had also been weighing a bid, people with knowledge of the matter said last month. HSBC advised Casino on the divestment.

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