Carrefour Confirms Talks to Buy Klepierre Shopping Malls

Carrefour SA, France’s biggest retailer, confirmed that it is in talks to buy shopping malls from Klepierre SA.

The companies haven’t yet reached an agreement, Boulogne Billancourt, France-based Carrefour said in a statement yesterday after the market closed. A further announcement will be made should there be a significant change to the discussions.

Carrefour plans to borrow 850 million euros ($1.1 billion) from banks for the transaction and has mandated BNP Paribas and Kempen to find about a half dozen institutional investors for the rest, Le Figaro newspaper reported yesterday, without saying where it got the information. Carrefour and Klepierre want to finalize a deal by the end of the year, according to Le Figaro.

The grocer’s stock declined 1.2 percent at the close, while Paris-based Klepierre rose 0.9 percent. Klepierre also confirmed the talks.

Carrefour is refurbishing outlets and maintaining low prices on food to make its largest store format more attractive amid competition from shops in city centers and online. French hypermarket sales rose for the first time in more than two years in the third quarter as Carrefour’s turnaround gathered pace, it said last month.

Klepierre, Europe’s second-largest publicly traded shopping-mall operator, said in July 2012 it planned to raise 1 billion euros from asset sales by the end of 2013 by disposing of offices to focus on malls. The real-estate investment trust said last month it has completed or reached agreements to sell 900 million euros of assets since the plan was announced.

Buying some of Klepierre’s smaller, underperforming shopping malls would make sense for Carrefour as it would give the retailer control of the sites around its hypermarkets, according to Exane BNP Paribas.

‘Need to Invest’

“You need to make the overall site more attractive for it to work better for the hypermarket, so that’s what it’s about,” said John Kershaw, an analyst at Exane BNP Paribas, who expects that the reported transaction would be negative short-term for Carrefour shareholders. “This reminds you that you need to invest as well as to sell businesses.”

Carrefour is focusing on Europe, Latin America and China after retrenching from markets where it viewed prospects as weak. In August, Chief Executive Officer Georges Plassat said the grocer “should consider our buildings as an activity, as a business.”

“Real-estate is something that is absolutely essential for retail provided that you use the real-estate for the business itself,” Plassat said Aug. 29. “You need to invest in order to get proper profitability.”

Carrefour revived and shelved a plan to spin off its property assets in 2011 amid opposition from shareholders and unions. The plan was to list a 25 percent stake in the French retailer’s real-estate in Europe.