UPDATE 2-Carrefour in talks to buy a portfolio of Klepierre malls

Thu Nov 7, 2013 3:45pm EST

* Companies say no agreement yet reached

* Deal seen for over 100 shopping malls at 1.7 bln eur-paper

* Carrefour seeking investors for deal and bank loans

* Carrefour, Klepierre decline comment

* Sound strategic move for Carrefour - analysts (Recasts with statements from companies, closing share price)

By Dominique Vidalon

PARIS, Nov 7 (Reuters) - France's Carrefour is in talks to buy a portfolio of shopping malls from real estate group Klepierre, it said on Thursday, in a move that could help its efforts to revive European hypermarkets.

French daily Le Figaro earlier reported that Europe's largest retailer was in talks to buy more than 100 shopping malls in France, Spain and Italy owned by the real estate group for 1.7 billion euros ($2.3 billion).

In separate statements, both companies confirmed talks were underway over the sale of shopping malls but stressed that no agreement had yet been reached and gave no further details. They said they would disclose financial terms only once a deal was reached.

The move would be a reversal from a deal in 2000 that saw Carrefour sell more than 150 of its shopping malls to Klepierre to cut debt and fund an expansion spree abroad.

Owning both the mall and the hypermarket within the mall would bring in rental income while facilitating Carrefour's efforts to renovate 150 of its 220 French hypermarkets over three years as it seeks to lure back lost customers.

CRUCIAL TO CONTROL BOTH

"To increase and protect the attractiveness of a retail site it is crucial to control both the hypermarkets and the shopping malls," Societe Generale analysts said in a note.

Carrefour, the world's second-largest retailer, has struggled for years in Europe, partly due to continued reliance on the hypermarket format it pioneered, as time-pressed customers shop more locally and online and buy non-food goods from specialists.

Since the arrival of new Chief Executive George Plassat in May 2012, Carrefour, the world's largest retailer after Wal-Mart , has sold non-core assets abroad to bolster its balance sheet and fund the revival of its French business as well as growth in its core emerging markets of China and Brazil.

Plassat has repeatedly said there was value to create from operating shopping malls that generate rental fees.

According to Le Figaro, which did not cite its sources, Carrefour could fund half of the deal with loans from banks and try to secure the remaining 850 million euros from institutional investors.

Carrefour would like five or six investors to buy a 100 million-200 million euro ticket each, the paper said, adding that Carrefour had mandated BNP Paribas and Kempen to find these investors.

Carrefour would create a non-listed vehicle for the shopping malls acquired from Klepierre and some that Carrefour already owns, whose value Le Figaro put at 500 million-600 million euros.

Carrefour would keep control of the new investment vehicle.

Societe Generale saw "no real financing issue" for Carrefour, which had reduced net debt by 3.7 billion euros to 5.9 billion at end-June.

Contracting additional debt of 850 million euros to fund half the deal would increase gearing to 46 percent from an estimated 37 percent at end-2013, they said.

Carrefour shares closed down 1.18 percent at 27.13 euros, slightly underperforming the STOXX 600 European Retail Index , which closed 0.24 percent lower. ($1 = 0.7472 euros) (Additional reporting by Natalie Huet,; Editing by Anthony Barker)

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