Carrefour Considering Sale Of Chinese & Taiwanese Businesses

Carrefour SA, the second-largest retailer in the world, is reportedly exploring the sale of its Chinese and Taiwanese businesses, according to reports. If the rumors are true this time, the sale could include a possible initial public offering in Hong Kong or a combination of some of those assets with another company, says Bonno van der Putten, retail industry expert from Private Equity firm Monarch Capital Partners.

While an IPO route could represent around $1 billion (€771 million) in funds for the retailer, plans are said to be still very much at a preliminary stage, with no banks engaged as of yet and Carrefour refusing to comment on any speculation.

Carrefour has recently exited several non-strategic markets to reduce its debts and raise cash. The French group has been struggling for some time in Europe, partly due to its reliance on the hypermarket format, which has fallen out of favour with time-pressed consumers.

The retailer has also been struggling in China of late, falling behind rival Auchan, which operates a joint venture with Taiwanese retail group Ruentex. Auchan launched an IPO on the Hong Kong stock exchange in 2011, which raised $1.1 billion to help further Auchan's expansion efforts in the country.

If this is true I believe this could be positive for Carrefour`, said Bonno van der Putten. `I expect more of the same;  in some extent it’s a dog, but with the new management no well in place, and a lot of pressure I see a turnaround on the horizon. This move is in line with Carrefour’s plans to exit non-core markets to focus on struggling operations in other countries and cut cost and boost profits. The company is refocusing its international strategy on regions where it already holds a significant position and where it can become market leader”. 

Van der Putten states that international expansion is a high risk high reward proposition, and for the world’s largest retailers as Carrefour, Walmart  and the METRO Group it is absolutely necessary for growth. Sometimes they get it wrong, more often they are getting it right. Both Walmart and Carrefour have pulled out of Russia, says van der Putten. In addition, Walmart withdrew from Germany and South Korea; Carrefour already left Algeria and Thailand; Tesco left Japan and is currently in the process of withdrawing from the United States; and, Metro left Morocco. Not every entry into a foreign country is successful. Local laws and restrictions sometimes can create unforeseen challenges. Sometimes there are local market dynamics that make good supply chain strategies impossible to operate

" But remember that China is a very important market for Carrefour. The country's current economic situation may pose some difficulties for retailers, but that does not prevent a continued expansion of international retailers in China," van der Putten said .

According to van der Putten, some months ago Carrefour still wanted to move ahead with expansion in 30 new Chinese cities in the next three years, especially cities in the central and western areas.

"Hypermarkets in big cities, such as Beijing and Shanghai, have been well developed. Retail giants will look for emerging markets in central and western areas, where they can take advantage of lower costs and rising purchasing power," said van der Putten

Last year, Carrefour said it was pulling out of Colombia, Singapore and Greece. Those markets are not the first that the French supermarket chain has left.

In 2010, Carrefour sold its business in Thailand for 868 million euros ($1.14 billion). In 2009, the company withdrew from the Russian market, which experts had seen as a promising one.

In 2005, Carrefour announced the sale of its operations in Japan and Mexico. In 2006, it sold its stores in South Korea.

http://www.bonnovanderputten.co.uk