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(Bloomberg Opinion) -- French supermarket operator Casino Guichard Perrachon SA has been a favorite plaything for short-selling hedge funds. So for its recovery to take two steps backward is a blow for the group and its chief executive officer, Jean-Charles Naouri.The owner of the Monoprix and Franprix chains looked as if it was gradually getting out of the woods, with Casino making a series of disposals and completing a refinancing, and its parent Rallye SA attempting to work through its 2.9 billion euros ($3.2 billion) of net debt after entering a creditor protection program last year.But things are never so straight-forward for the two companies, which are inextricably tied. (Rallye is Naouri’s investment vehicle.) Now a profit warning, together with some bondholders rejecting Rallye’s plan to repay 1.6 billion euros of debt over 10 years, throw into question Casino’s nascent recovery.The retailer on Thursday halved its forecast for the expansion in trading profit in 2019 to 5%, after fourth-quarter retail sales were worse than expected. Strikes in France during the crucial holiday shopping period shaved about 2% off of its fourth-quarter sales. It wasn’t alone. Fnac Darty SA, which sells books, music, electronics and home appliances, also said the unrest over a proposed pension overhaul hurt its revenue. But Casino shares fell as much as 13%, the most in more than a year, indicating that investors weren’t convinced the problems are confined to the disruption.While both Casino and Rallye were saddled with debt, the underlying French business has been in acceptable shape, with exposure to faster growing segments such as convenience stores. If this stability is now under threat, that is a concern, not just for Casino’s progress, but Rallye’s restructuring too.Bondholders rejecting Rallye’s plan — with the company failing to win support in four out of five euro-bond classes — is a sign the coast isn’t yet clear on that front either. But the vote isn’t binding on the Paris court that’s set to rule on the plan by the end of March.However, the profit warning doesn’t make the situation any easier. First, Rallye’s main asset is its 52% holding in Casino, so a weaker share price might make creditors, particularly the banks, feel less comfortable with the plan. Second, the revised profit guidance makes it even more difficult for Casino to generate cash to pay the dividends to Rallye that are necessary for the group to reduce its own borrowings.Casino has said that it will not make a distribution this year. After that it can make a payment, but its ability to do so will be capped by the terms of its recent refinancing. There could be special dividends from a sale of the Leader Price discount chain to Aldi, which is being discussed, or offloading assets in Latin America, but returning to regular pay-outs looks even more challenging.Of course the share price decline may have another effect: Making a takeover of Casino more likely. Rivals in France’s highly competitive supermarket industry, such as Carrefour SA, have a duty to a look to see if they can make hay from the retailer’s misery. Casino also has an online partnership with Amazon.com Inc. It’s also worth watching what Czech billionaire Daniel Kretinsky and his partner Patrik Tkac have up their sleeves after they acquired a 4.6% stake in Casino last year.But until any suitor shows their hand, Casino investors and bondholders face the prospect of a long, drawn out grind toward better times. As for short sellers, they get another spin of the wheel.\--With assistance from Marcus Ashworth.To contact the author of this story: Andrea Felsted at email@example.comTo contact the editor responsible for this story: Melissa Pozsgay at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- You’d expect the world’s second-largest economy to have a bigger presence on the world stage. But in mergers and acquisitions, China’s presence has been shrinking for years, and 2020 is unlikely to be any better.In 2016, the country was the world’s largest acquirer of overseas assets after the U.S. It tumbled to eighth place this year, trailing Japan and even Singapore, according to data compiled by Bloomberg. While the phase-one trade deal between Washington and Beijing may ease some tensions, frosty relations between China and many developed countries appear set to persist. Add tightened credit to this protectionist mix, and China’s acquisitions have little chance of regaining the heights of 2016, when state-owned China National Chemical Corp. agreed to pay a record $43 billion to buy Swiss agrochemical maker Syngenta AG.Washington turned more hostile to Chinese purchases of U.S. assets after Donald Trump gained the presidency, and since has become only more strict. The Committee on Foreign Investment in the United States, a federal panel that reviews acquisitions on national-security grounds, even started including purchases of data on American customers in its checks. The Trump administration has also sought to enlist U.S. allies in squeezing out Huawei Technologies Co. as a supplier of fifth-generation wireless equipment.Such actions have been seen as a clear shot at the Made in China 2025 plan, which set targets for the country to become a leader in critical technologies. Chinese venture capital investment in the U.S. fell 27% to $1.1 billion in the first half of 2019, from $1.5 billion in the July-December period last year, according to Rhodium Group LLC, an independent research firm.Europe, previously more receptive to Chinese investment, has turned a lot less welcoming on the sale of technology and infrastructure. Regulators took their time approving what could have been China’s largest overseas deal of 2019 — the 9.1 billion euro ($10.2 billion) takeover of Portuguese utility EDP-Energias de Portugal SA, prompting state-owned buyer China Three Gorges Corp. to pull out in April. Germany, meanwhile, is looking at putting tighter restrictions on Chinese buying following high-profile investments in companies such as Deutsche Bank AG and industrial robot maker Kuka AG in recent years. A push by lawmakers to ban Huawei from its 5G network threatens to further chill relations. Even President Xi Jinping’s signature Belt and Road Initiative, which prompted a wave of Chinese acquisitions in countries that have signed on to the trade-infrastructure campaign, has faced a backlash.Beijing’s drive to control debt has played a part in tamping down deals. After the ill-fated spending sprees of conglomerates such as HNA Group Co. and Anbang Insurance Group Co., now being unwound, companies have become more cautious. Chinese banks are less aggressive when it comes to lending for overseas purchases, according to Bee Chun Boo, M&A partner at Baker McKenzie’s Beijing office. The average size of China’s foreign acquisitions has shrunk by two-thirds since 2016 to $74 million, from $230 million (a figure that already strips out the Syngenta deal). Chinese buyers have stopped seeking controlling stakes to avoid raising protectionist hackles, and are searching out non-Chinese buying partners.Anta Sports Products Ltd.’s $5.2 billion purchase of Finland’s Amer Sports Oyj is an example of what the typical Chinese acquisition may look like in coming years. Anta led an investor group that included Lululemon Athletica Inc. founder Chip Wilson, and the target — a tennis racket maker — was in a non-sensitive sector. With the environment souring in the U.S. and Europe, Chinese acquirers will look more within Asia. In September, China Telecommunications Corp.’s entered a $5.4 billion agreement to set up a third major Philippine telecom operator with two local partners.The home market may provide more promising action for China-focused bankers in the year ahead. Beijing is opening its financial sector, inviting more foreign banks, insurance providers and other companies to set up shop. In November, Chubb Ltd. paid $1.5 billion to boost its stake in Huatai Insurance Group, and Allianz SE forked out about $1 billion for part of Goldman Sachs Group Inc.’s stake in Taikang Life Insurance Co. Deal activity may accelerate in 2020, when foreign securities firms, futures businesses and life insurance companies will be allowed to fully own their Chinese units.As financial companies enter, others are leaving. Chinese buyers are picking up the pieces as Carrefour SA and Metro AG sell the bulk of their local operations, joining Tesco Plc and Distribuidora Internacional de Alimentacion SA in giving up on a tough retail market. Nestle SA is another international company considering options for its Chinese units.Advising on exits is a shrinking business by nature, though, and unlikely to compensate for the fall-off in China’s outbound deals. No China M&A banker is going to be partying like it’s 2016.\--With assistance from Yuan Liu and Elaine He. To contact the author of this story: Nisha Gopalan at email@example.comTo contact the editor responsible for this story: Matthew Brooker at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- In the heart of New Delhi’s largest wholesale bazaar, merchants who normally compete with each other have united against a common enemy.“Amazon, Flipkart!” one merchant after another shouts into a microphone from a small stage in Sadar Bazaar’s central traffic circle. Some 50 other shopkeepers gathered around shout back in unison: “Go back! Go back!”The sit-in, which created more chaos than usual among the rickshaws, motorbikes and ox-carts plying the market road, was one of as many as 700 protests against Amazon.com Inc. and Walmart Inc. -- owner of local e-commerce leader Flipkart -- that organizers say took place at bazaars across India on a recent Wednesday.Predatory PricingIndia’s shopkeepers are mobilizing against the global e-commerce giants, alleging they are engaged in predatory pricing in violation of new rules meant to protect local businesses. At stake is the future of retailing in a country with 1.3 billion consumers, where Walmart and Amazon have sunk billions of dollars trying the crack the market and capture its growth potential.“Amazon and Flipkart are a second version of the East India company,” said Praveen Khandelwal, national secretary of the Confederation of All India Traders at the Delhi protest, referring to the British trading house whose arrival in India kicked off nearly 200 years of colonial rule. “The motive of Amazon and Flipkart is not to do business, but to monopolize and control.”India’s government in October announced an investigation into the allegations of predatory pricing. Amazon and Walmart said in statements to Bloomberg News last week that their operations comply with Indian laws, and that they act only as a third-party marketplace.The conflict comes amid a broader global backlash against the breakneck expansion of tech firms -- from protests by taxi drivers against an Uber-clone in Jakarta, to couriers for a Softbank-backed delivery startup creating a bonfire of their backpacks in Bogota in protest of low wages and poor benefits.Worsening PainIndia’s slowing economy -- it expanded at the slowest pace in more than six years last quarter -- and the accompanying consumption slowdown has worsened the pain of these neighborhood stores.Representing about 70 million small merchants who collectively control almost 90% of India’s retail trade, India’s shopkeepers union has shown itself to be a strong political force. The traders are an important part of the voter base of Prime Minister Narendra Modi’s Bharatiya Janata Party.“For a government, especially a government of the BJP, which has the support of small businessmen, it may not be prudent or politically advisable to totally ignore such demands,” said Sandeep Shastri, a political scientist at Jain University in Bangalore. “They would have to be seen taking some steps at least.”The union’s power is a significant reason the government has placed such onerous restrictions on foreign retailers -- including a minimum $100 million investment and strict local sourcing rules. Because of the hurdles, the likes of Walmart and Carrefour SA have all but given up on opening their eponymous stores in the country.The shopkeepers won a key victory against the foreign e-commerce players last year when the government tightened regulations on how the platforms are allowed to sell goods. The rules, aimed at creating a level playing field on pricing, forced Amazon and Flipkart to pull thousands of items from their virtual shelves and restructure large parts of their local operations.The changes, coming after Walmart announced its acquisition of Flipkart, threw the foreign companies into chaos and prompted analysts to question their India investments. With Amazon shut out of China and Walmart’s e-commerce performance in the U.S. decidedly mixed, both companies have settled on India as key to growth. Amazon CEO Jeff Bezos has pledged to spend $5.5 billion to win India, while Walmart’s $16 billion Flipkart deal was the retailer’s biggest ever.Now the shopkeepers are alleging Amazon and Flipkart are circumventing the rules with predatory pricing and deep discounting. They are demanding the government shut down the companies’ online marketplaces until they are in compliance.Amazon said its sellers have complete discretion on what price to sell their products. Flipkart said it provides sellers with data to help determine what product offerings will sell best at what price, but business decisions are ultimately the sellers’ to make.The flash point for the latest escalation was Diwali, a Hindu festival that’s occasion for a gift-giving bonanza akin to Christmas in Western countries. This year’s festival in October came amid a slowdown in consumer spending that’s hit everyone from carmakers to shampoo sellers. But while the shopkeepers union said its members saw as much as a 60% drop in Diwali sales, Amazon and Flipkart managed to report record revenue from the six-day festival.The shopkeepers union argued that the online holiday deals must be in violation of the new rules, prompting Commerce Minister Piyush Goyal to announce an investigation.“E-commerce companies have no right to offer discounts or adopt predatory prices,” Goyal said in October. “Selling products cheaper and resulting the retail sector to incur losses is not allowed.” Another government official said policy makers are looking at setting up a dedicated e-commerce regulator.A spokesperson for the commerce and industry ministry didn’t respond to an email seeking comment.Vinod Kumar, a 35-year-old shopkeeper selling women’s cosmetics in the Delhi bazaar, is looking for relief. Standing by his small stall, he picks up a bottle of a rosewater-based hair product. He sells it for 40 rupees (56 cents), but says customers can get it from Amazon or Flipkart for 30 rupees, with delivery right to their home.Heat, Crowds“If everything is available online, why would anyone come here to face the heat and the crowds?” he says. “My business is shrinking by the day.”Kumar says if the situation continues he may go out of business, as many other shops already have.Overall data show sales at traditional mom-and-pop shops are still growing in India. Though these stores have seen a decline in their share of total retail sales since 2014 as e-commerce and organized retail chains grab market share, the consumer market is expanding at such a pace that absolute spending with mom-and-pop shops increased nearly 60%, according to consultancy Technopak Advisors. That pace of absolute growth is projected to slow slightly to 50% over the next five years.That may be cold comfort to Muhammad Yusuf. The 72-year-old, who runs a jewelry shop at the Delhi bazaar, says he’s unable to match the prices online, has cut his staff from six employees to two and is in danger of not being able to pay rent.Yusuf is conspicuous in the e-commerce protest, however, in that he’s sporting a fleece jacket bearing the Amazon logo. Asked why he’s wearing it, he shrugs and says he needed something to keep him warm and found it in a clothing stall nearby. He bought it because it was cheap.(Updates with India’s GDP growth data in the eighth paragraph.)\--With assistance from Shruti Srivastava.To contact the reporter on this story: Ari Altstedter in Mumbai at email@example.comTo contact the editors responsible for this story: Rachel Chang at firstname.lastname@example.org, Jeff Sutherland, Bhuma ShrivastavaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
When the little known Ken Murphy takes over next year as CEO of Tesco, Britain's biggest retailer, he will inherit something current boss Dave Lewis did not have the luxury of when he joined in 2014 - a strategy and a stable business. When former Unilever executive Lewis became CEO of Tesco on Sept. 1, 2014, the supermarket group was already reeling from a dramatic downturn in trading. Three weeks later, an accounting scandal plunged it into the biggest crisis in its history.
Tesco boss Dave Lewis, credited with saving Britain's biggest retailer from collapse in 2014, will step down next summer after declaring its turnaround complete, handing over to a relative unknown catapulted into one of the sector's top jobs. Celebrating its 100th anniversary, Tesco is five years into a recovery plan launched by Lewis after an accounting scandal capped a dramatic downturn in trading. Successor Ken Murphy, a former executive at healthcare group Walgreens Boots Alliance, will become the second outsider to lead Tesco, following in the footsteps of former Unilever executive Lewis.
* China's conciliatory statement boosts European stocks * STOXX 600 +0.7%, FTSE 100 +1.2% * Tech stocks outperform, luxury underperforms * Pearson and Imperial Brands slump on profit warnings Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Thyagaraju Adinarayan. Reach him on Messenger to share your thoughts on market moves: rm://email@example.com A DEEPER LOOK INTO THE LONDON TRIO'S PROFIT WARNINGS (1009 GMT) A cigarette maker, an airline and an education group - what's the one thing in common between them today? Combined $5 billion has been wiped from London blue-chips Pearson, Imperial Brands and British Airways-owner IAG as they warned on full-year profits.
* European stock futures up slightly * German economy stalled in Q4 * Earnings in focus Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters ...
* European shares end down slightly in choppy trade * Ingenico results disappoint; Metro Bank tanks * Retailers lifted by Carrefour, Ahold updates * Wall St pares gains after positive open on strong earnings ...
European shares were sluggish on Wednesday as a batch of poor corporate updates added to worries about a global growth slowdown and China-U.S. trade negotiations. The STOXX 600 ended down 0.1 percent, having wavered in and out negative territory throughout the session. After hitting two-year lows last month, the STOXX 600 has regained some ground so far this year with investors lured back by cheap valuations, although uncertainties remain over how long the rebound could last.
* European shares turn flat in choppy trade * ASML, Ingenico results disappoint; Metro Bank tanks * Retailers lifted by Carrefour, Ahold updates * Wall St pares gains after positive open on strong earnings ...
* European shares turn higher, STOXX 600 at session high * Asian shares dip on growth, trade worries * ASML, Metro Bank, Ingenico results disappoint * But Carrefour shares boosted after Q4 update Welcome ...
* European shares turn higher, STOXX 600 at session high * Asian shares dip on growth, trade worries * ASML, Metro Bank, Ingenico results disappoint * But Carrefour shares boosted after Q4 update Welcome ...
* European shares erase opening losses * Asian shares dip on growth, trade worries * ASML, Metro Bank, Ingenico results disappoint * But Carrefour shares boosted after Q4 update Welcome to the home for ...
European shares dipped on Wednesday morning as a new batch of corporate updates prompted fresh concerns, particularly on the tech sector, and added to worries about a global growth slowdown and Sino-U.S. ...
* European shares fall for third straight day * Asian shares dip on growth, trade worries * ASML, Metro Bank, Ingenico results disappoint * But Carrefour shares boosted after Q4 update Welcome to the home ...
* European shares seen lower * Asian shares dip on growth, trade worries Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today ...