Eurofood: Casino, Galeries Lafayette to share control of Monoprix - Brief Article

Casino, the French retail group, is to increase its stake in Monoprix, the city centre retailer owned by the Galeries Lafayette group. Casino will pay ??219 per share for 22% of Galeries Lafayette's 72% stake in Monoprix, a significant premium on the closing price of ??114 per share, leaving both parties with equal 50% stakes and valuing Monoprix at ??2.12bn. The deal will benefit all the parties concerned: Monoprix will gain an experienced retail partner to help it develop its operations; Galeries Lafayette will retain a significant stake in a business which generated 57% of its total sales last year, as well as gaining a much needed cash injection to help renovate its ageing department stores; and Casino will expand its own business substantially despite having only limited funds for growth.

In order to finance the deal, Casino will carry out a capital increase of between ??320-440m. There should, however, be no change its own shareholder structure, with the Rallye group remaining the most important investor with 52%, followed by the Guichard family (5%). Galeries Lafayette will take a 3% stake in Casino as part of the deal. The timing of the deal is particularly propitious, as Monoprix is currently experiencing a significant improvement in its profitability. Its margin is expected to improve from 2.4% to 3% this year, almost the same as Casino (3.7% forecast for 2000).

INTERNET VENTURE

Casino has also negotiated an option to acquire the remaining 50% of Monoprix within the next three years if Gaieties Lafayette decides it wants to sell the business. It also becomes a minority shareholder in Telemarket, Galeries Lafayette's Internet shopping subsidiary, which is to merge with Casino's own portal, C mes Courses.

DEAL DRIVES FOREIGN GROWTH

Monoprix will benefit from Casino's superior knowledge of international markets to help export its Citymarche store format. "[Foreign] groups which are for sale often own city centre outlets which the major multiple chains do not always know how to handle," commented one analyst. Monoprix is a tiny player on the world stage and has just 4% of the French market, making it impossible to compete with the major companies on their terms, hence the concentration on the niche market of city centre outlets. At present, there is only one Monoprix store outside France (a 5 000[m.sup.2] outlet in Beirut), but several more are in planning stage for Tunisia, Morocco, Poland and the island of Mauritius.