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Investors left confused as Tesco partner Carrefour denies bid approach for Casino

Casino said it had rejected a tie-up approach from Carrefour but Carrefour said it was surprised to hear about a "merger proposal that does not exist"

Carrefour
Carrefour agreed a strategic partnership with Tesco in August

Carrefour, France’s second-largest supermarket that agreed a “strategic alliance” with Tesco PLC (LON:TSC) in August, has denied approaching rival Casino about a potential merger.

The remarks came in response to Casino saying it had rejected a tie-up approach from Carrefour due to concerns regulators were unlikely to approve a deal, given their market strength.

READ: Tesco-Carrefour tie-up a 'direct response' to Sainsbury's-Asda merger, analysts say

Casino, which is the fourth largest grocer in France, said Carrefour had contacted the company in recent days and its board of directors held a meeting on Sunday to discuss the approach.

"The board unanimously reiterated its entire confidence in Casino's strategy for value creation based on its unique market positioning," Casino said.

Carrefour said it was surprised Casino's board could have considered "a merger proposal that does not exist".

The supermarket added: "The difficulties faced by Casino and its controlling shareholder (do) not justify untimely, misleading and groundless communications," Carrefour added.

Casino’s shares have lost nearly a third in value in the year to date as it struggles against the sector-wide challenge of rising competition, particularly from discounters. Investors are also worried about the debts facing the chain and parent company Rallye, which needs to repay more than €600mln worth of bonds in October and a further €300mln worth in March.

Carrefour has attempted to address tough competition by joining forces with Tesco in a "strategic relationship"  that will allow them to use their joint buying power to negotiate lower prices from global suppliers.

READ: Tesco's strategic alliance with Carrefour to become operational in October

The two announced the proposed partnership in July and confirmed a formal agreement in August. 

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