Thursday, May 5, 2011

Carrefour French boss goes, shelves property IPO

PARIS: Carrefour, Europe's No.1 retailer, said on Thursday, May 5the head of its core French business was leaving and it was shelving a contentious property listing, fuelling talk of boardroom splits and worries over its turnaround plan.

The group said James McCann was leaving only 15 months after being appointed because its performance in France was not good enough, raising concerns over its mew Carrefour Planet hypermarkets -- the lynchpin of its turnaround plan.

One person familiar with the matter also said the former Tesco manager was uncomfortable with plans to spin off assets, which have been championed by key shareholders Colony Capital and Groupe Arnault but opposed by others.

"Neither of these developments is positive in our view and once again brings into question management's strategy and ability to 'flawlessly execute' its turnaround plan," Espirito Santo analysts said in a research note.

At 0820 GMT GMT, Carrefour shares were down 1.8 percent at 31.05 euros, off an earlier low of 30.8 euros and valuing the group at 22 billion euros. The stock has lagged the STOXX Europe 600 retail index by 13 percent over the past year.

"McCann's departure will raise further questions over the potential for the "Planet" concept and the "En Avant" turnaround programme to be successful and this is key to our long term investment case," JP Morgan Cazenove analysts said.

Carrefour, the world's second-biggest retailer by sales behind U.S. group Wal-Mart, said Chief Executive Lars Olofsson would take over the operational management of its French business pending the appointment of a successor and it would press ahead with plans to spin off discount chain Dia.

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MAKING PLANS

Carrefour launched its "En Avant" turnaround plan in 2009 with a goal of making 4.5 billion euros of savings and in September said it would invest 1.5 billion euros in revamping its main western European hypermarket business.

After initial enthusiasm for the plans, investors' confidence was shaken by two profit warnings late last year.

Earlier this year, the group came up with a plan to float all of discount chain Dia and 25 percent of Carrefour Property to deliver 4 billion euros ($5.6 billion) in special dividends and mollify key shareholders Colony and Arnault.

However, the property spin-off in particular sparked opposition from a range of parties including activist shareholder Knight Vinke, European shareholder rights group Deminor, French minority shareholder association APPAC, French labour unions and founding family shareholder Defforey.

The critics said ceding some control of its PROPERTIES [] could weaken Carrefour in an intensely competitive grocery market, and people familiar with the matter said there was some opposition to the plans within the boardroom.

Earlier this year, European boss Vincente Trius defected to Canadian grocer Loblaw and independent board member Jean-Martin Folz left, fuelling talk of divisions.

"The broader question this raises is why they were doing it (the property spin off) in the first place. There's some pretty big worries about corporate governance there," said Bernstein analyst Chris Hogbin.

Carrefour said its property business would press ahead with its 2 billion euro portfolio of projects and would be managed autonomously, as well as given a dedicated corporate governance structure, in preparation for a listing in the future.

The group, with over 15,000 stores in 34 countries, repeated its goal to grow sales and operating income this year. - Reuters

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