Czech billionaire Kretinsky seeks Casino control with $1.2 billion capital hike

By Dominique Vidalon and Mathieu Rosemain

PARIS (Reuters) -Czech billionaire Daniel Kretinsky is offering to take control of debt-laden French supermarket chain Casino through a 1.1-billion euro capital increase, challenging a proposed tie-up between Casino and smaller retailer Teract.

The deal would bring a string of well-known retail brands such as Monoprix and Franprix under Kretinsky's umbrella in France, where he has increased his exposure in recent years, and offer a way out for Casino's owner, 74-year-old Jean-Charles Naouri.

Casino's e-commerce retail arm CDiscount is also widely believed to be a target for Fnac Darty, whose top investor is Kretinsky.

Kretinsky, who built one of Europe's largest energy groups through more than a decade of deals, has been diversifying into retail, media and other areas.

He owns a stake in French newspaper Le Monde, France's biggest private TV network TF1 and is in talks with media group Vivendi to acquire publishing group Editis.

Casino shares rose 3% on Monday after news of Kretinsky's offer. They slumped to record lows after rating agency Moody's cut its long-term debt rating further into junk territory last month, its market value now around 700 million euros versus 11 billion in 2014.

TERACT TALKS

With around 3 billion euros of debt maturing in 2024 and 2025, Casino has been selling assets to meet debt repayments, including a stake in its Brazilian business Assai.

Kretinsky's offer comes as Casino conducts exclusive talks to combine its French retail business with Teract, a company backed by billionaire Xavier Niel.

On Monday, Casino announced that Groupement Les Mousquetaires, owner of supermarket chain Intermarche, had joined those tie-up talks.

Separately, it said EP Global Commerce, a Czech company controlled by Kretinsky, had offered to subscribe to a capital increase worth 1.1 billion euros.

Under the deal, Kretinsky's entity would subscribe to a reserved capital increase of up to 750 million euros, while No. 3 shareholder Fimalac, the holding of billionaire Marc Ladreit de Lacharriere, would buy into a share sale of up to 150 million euros. Casino's other existing shareholders would take a further 200 million euros.

Two sources close to the matter said the capital increase would give Kretinsky, already Casino's second biggest shareholder with around 10%, a more than 40% stake.

The proposal would include cash repurchases of Casino's debt, converting it into equity, potentially leading to a change of control and a dilution of existing shareholders, Casino said.

One of the sources close to the matter said Kretinsky's proposal would require an agreement with Casino creditors behind 3.6 billion euros worth of unsecured debt.

Under the deal debt would be converted into equity or reimbursed at a discount.

"In both cases the debt would be removed, significantly improving the balance sheet of Casino," the source said.

Casino said it was considering asking for a court-appointed conciliator to oversee discussions with bank creditors and bondholders over the two potential deals.

It said it planned to analyse EP Global Commerce's proposal over the coming weeks, while also continuing discussions with Teract and Groupement Les Mousquetaires.

($1 = 0.9099 euros)

(Reporting by Dominique Vidalon and Mathieu Rosemain; editing by Silvia Aloisi and Jason Neely)