(Bloomberg) -- Casino Guichard Perrachon SA's (PA:CASP) embattled Chief Executive Officer Jean-Charles Naouri got help in his efforts to keep control of the French retailer from a pair of eastern European investors who bought a stake and endorsed his strategy.
Czech billionaire Daniel Kretinsky and partner Patrik Tkac acquired 4.6% of Casino, turning their attention to the troubled retailer after their effort to take over German wholesaler Metro AG was rebuffed. Casino shares surged as much as 6% in Paris trading.
Kretinsky and Tkac, who bought the stake via investment vehicle Vesa Equity, see opportunity in Casino’s business model. The two said in a statement Thursday that they believe the company to be “the distribution group best positioned on the French market and one of the European leaders best equipped to address the sector’s profound transformations.” They will get a seat on the board.
Casino’s Troubles
The move comes as Casino seeks to shore up its finances and reduce debt after a long fight with short sellers. Parent company Rallye SA is operating under French “safeguard” procedures that provide protection from creditors. Rallye is part of a string of indebted holding companies that allow Naouri to control the retailer. Its shares soared as much as 13% after the announcement.
Casino is caught between an ownership structure that’s forced it to pay high dividends to keep its parent afloat and a competitive French landscape in which it faces hard discounters such as Lidl and larger rivals such as Carrefour (PA:CARR) SA and E. Leclerc. In July, it canceled next year’s dividend as it accelerates its debt-reduction plans.
The new investors said they support Casino’s “omnichannel” strategy, under which it operates everything from suburban big-box outlets to downtown convenience stores while boosting its digital efforts. Its food-and-clothing stores under the Monoprix brand, which have a partnership with Amazon.com Inc (NASDAQ:AMZN)., have outperformed the larger hypermarkets by attracting upmarket shoppers. Casino also has a deal with U.K. online grocer Ocado (LON:OCDO) Group Plc.
Financing Crunch
Casino said in August that it plans a new round of asset disposals that would raise an additional 2 billion euros ($2.2 billion), after a first phase of 2.5 billion euros worth of divestments. Casino has lost access to some short-term financing after S&P Global Ratings downgraded the company to five levels below investment grade in May.
Casino’s bonds due January 2023 gained 1.5 cents on the euro to 93 cents, rising to the highest level in more than three months, according to data compiled by Bloomberg.
Kretinsky, who has a net worth of at least $3 billion, according to the Bloomberg Billionaires Index, has built a portfolio that includes energy and media assets alongside the Sparta Prague soccer team. Last year, he acquired a stake in French daily Le Monde.
In June, he and Slovakian partner Tkac launched a 5.8 billion-euro bid to buy out Metro, but last month the offer fell short of the minimum shareholder acceptance threshold.
After the takeover attempt for Metro failed, Kretinsky said he would not purchase more shares in the German wholesaler for the time being while he awaits progress on Metro’s efforts to sell German big-box retail chain Real and a stake in its operations in China to focus on cash-and-carry outlets.
(Updates with Rallye shares in fourth paragraph, Casino bonds in last.)