Retailer Casino signs deal with trio of star French businessmen

French businessman Jean-Charles Naouri has struck a deal to combine his French supermarket unit with Teract, a smaller food retailer, in a move that may help him stave off creditors and restructure his heavily indebted holdings.

Naouri’s Casino and Teract on Thursday said they had entered exclusive negotiations over the combination, although little was disclosed on valuation or the amount of debt the new company would carry. At least €500mn in equity will be injected into the new venture to help it “execute an ambitious growth plan” by Teract and potentially other investors.

Naouri’s Casino will spin out its French retail assets such as Monoprix and Franprix and combine them with Teract, a listed company formed last year in a Spac deal involving Invivo, a farmers’ co-operative, and entrepreneur Moez-Alexandre Zouari, tech billionaire Xavier Niel, and investment banker Matthieu Pigasse.

Both retail operations would be combined into a new entity, which would be 60 per cent controlled by Casino and 40 per cent by Teract, according to a person close to the deal. Another entity would provide food and farm products to the retail arm, which would be 60 per cent owned by Teract and 40 per cent by Casino.

The deal is the latest twist in a saga that has fascinated the French business world for almost a decade. The 74-year-old Naouri was once a star banker and executive in Paris, known for using financial engineering to build an empire in food retail.

He set up a layer cake of holding companies through which he controls Casino, but overburdened them with debt. After the retail business degraded because of ecommerce and competition, Naouri was forced to put some of the entities into the French equivalent of bankruptcy in 2019.

That has largely frozen the situation but both Casino and the parent companies — Rallye, Euris, Finatis, Foncière Euris, all now in court-protected restructuring — face a looming wall of debt repayments in 2024 and 2025.

Casino has been selling assets in anticipation of €1.2bn in debt due in 2024 and €1.8bn in 2025, while Rallye must pay back €1.9bn in 2025 after winning a two-year reprieve in the pandemic. Credit analysts have doubts that Rallye can make the payments, and S&P downgraded Casino’s long-term debt to CCC+ in October.

If finalised, the deal with Teract would throw Naouri a lifeline by bringing in new money and removing some of the debt from Casino group. The new company could embark on a turnround to try to stem the market share losses that have plagued Casino’s supermarkets.

It also offers a potential solution to the thorny issue of who would succeed Naouri, because he is teaming up with Zouari, one of his oldest associates who has been a leading franchisee of Casino and Franprix for more than two decades.

“This is an elegant solution that allows everyone to claim victory,” said the person.

Clément Genelot, an analyst at Bryan Garnier, said the deal could help Naouri in his negotiations with creditors in the court-protected restructuring process of Casino’s parent companies.

“The bet Naouri is making in merging France operations with Teract is that it will create an asset that’s better valued than it is now,” he said. “Naouri’s ultimate goal is to negotiate the debts at Rallye.”