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Fitch: Purchase of Dia's French Convenience Stores a Net Benefit for Carrefour
June 26, 2014 / 1:40 PM / 3 years ago

Fitch: Purchase of Dia's French Convenience Stores a Net Benefit for Carrefour

(The following statement was released by the rating agency) LONDON, June 26 (Fitch) Fitch Ratings says Carrefour SA's (BBB/Positive) proposed purchase of the hard discount food retailer Dia's French portfolio will allow the group to accelerate its shift towards faster growing and more profitable convenience food retail formats in its core French market. In Fitch's view the resulting enhancement of Carrefour's business profile will more than offset the slightly negative impact of the acquisition on leverage. The acquisition is in line with Carrefour's multi-format development strategy in its domestic market. It will give Carrefour over 550,000 square metres of retail space in the French convenience store sector, where it is under-represented. Fitch calculates that the acquisition would have increased Carrefour's 2013 convenience sales to approximately 16% of the group's total French sales from approximately 11.5%. The acquisition will provide the group not only with close to 2 percentage points of additional market share, it will also help balance Carrefour's geographic coverage in France, as a significant part of Dia France's network is concentrated around the high spending Ile de France and South East of France areas. Fitch expects it will take two to three years before the positive effect from an enlarged convenience store network can be seen on Carrefour's French EBIT margin, due to Dia France's negative EBIT generation (-EUR17.7m in 2013). The agency's expectations take into account necessary restructuring actions and some execution risk at integrating ailing operations into Carrefour's own network. However, given that Dia's French stores were spun-off from Carrefour only three years ago, Fitch expects that the company should have deep knowledge of the stores. Fitch believes that the related EUR600m acquisition spending (including debt), together with the necessary refurbishment and restructuring costs, should only slightly slow down Carrefour's expected deleveraging pace over the next three to four years. Based on our 2014 projections, we estimate the acquisition will have a mild adverse impact of 0.2x on lease-adjusted FFO net leverage (excluding financial services). The agency believes Carrefour should return to its deleveraging process from 2015, as growing profitability and enhanced EBIT generation should progressively offset remaining cash refurbishment and restructuring costs. Contact: Jean-Pierre Husband Director +44 20 3530 1155 Fitch Ratings Limited 30 North Colonnade London E14 5GN Anne Porte Associate Director +33 1 44 29 91 36 Media Relations: Francoise Alos, Paris, Tel: +33 1 44 29 91 22, Email: francoise.alos@fitchratings.com; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. Additional information is available on www.fitchratings.com. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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