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Carrefour shares fall on Pao de Acucar deal worries | Carrefour shares fall on Pao de Acucar deal worries |
(about 6 hours later) | |
Shares in French supermarket giant Carrefour fell as much as 4.6% amid reports that a merger deal in Brazil may have stalled. | |
Brazil's government is said to have withdrawn its financial and political support for a controversial tie-up between retailer Pao de Acucar and the local unit of Carrefour. | Brazil's government is said to have withdrawn its financial and political support for a controversial tie-up between retailer Pao de Acucar and the local unit of Carrefour. |
The deal depended on financing from Brazil's BNDES state development bank. | The deal depended on financing from Brazil's BNDES state development bank. |
Carrefour's French rival Casino has strongly opposed the merger. | Carrefour's French rival Casino has strongly opposed the merger. |
The two French companies, along with America's Wal-Mart, are competing vigorously in Brazil's fast-growing grocery market. | The two French companies, along with America's Wal-Mart, are competing vigorously in Brazil's fast-growing grocery market. |
Casino called the merger "expropriation", and there were signs the Brazilian public was growing hostile to the deal. | Casino called the merger "expropriation", and there were signs the Brazilian public was growing hostile to the deal. |
The merger was championed by Brazilian tycoon and Pao de Acucar shareholder Abilio Diniz. | The merger was championed by Brazilian tycoon and Pao de Acucar shareholder Abilio Diniz. |
He is a big shareholder in Casino, and the merger plan has reportedly strained relations between Mr Diniz and the company. | He is a big shareholder in Casino, and the merger plan has reportedly strained relations between Mr Diniz and the company. |
Mr Diniz, the 74-year-old son of Pao's founder, was due in Paris on Tuesday for a meeting with Casino executives. | Mr Diniz, the 74-year-old son of Pao's founder, was due in Paris on Tuesday for a meeting with Casino executives. |
'Soap opera' | |
Analysts said the decision was a blow to Carrefour, which has been restructuring and recovering from three profit warnings in under a year. | Analysts said the decision was a blow to Carrefour, which has been restructuring and recovering from three profit warnings in under a year. |
"Management clearly expected that the deal would go through and that the synergies would form a core part of its ability to significantly improve its Brazilian hypermarket profitability," said Royal Bank of Scotland analyst Justin Scarborough. | "Management clearly expected that the deal would go through and that the synergies would form a core part of its ability to significantly improve its Brazilian hypermarket profitability," said Royal Bank of Scotland analyst Justin Scarborough. |
"If the deal falls apart, then this would be disappointing," he said. | "If the deal falls apart, then this would be disappointing," he said. |
However, few analysts think the story is over. | |
"I expect this will be a very long soap opera with lots more twists and turns," said Chris Hogbin, analyst at Bernstein. | |
Shares in Carrefour closed down 2.7%. |