French supermarket group Casino is offloading a chunk of its 41pc stake in Brazilian peer Assai as part of its efforts to cut down debt.
The retailer, led by French businessman Jean-Charles Naouri, is seeking to sell assets worth €4.5bn by the end of 2023, in a bid to cut its high leverage. The announcement on Monday that it will divest 140.8mn shares in Assai, representing 10.4 per cent of the Brazilian company’s share capital, will further bolster its efforts.
Based on Assai’s closing share price on Friday, the share sale is worth about $500mn, although the exact proceeds for Casino will depend on the final price and volumes achieved in the secondary offering. The retailer said on Monday it could sell a further 49.5mn shares, or 3.7 per cent, depending on demand.
Casino’s shares rose as much as 4 per cent before paring back gains in mid-day trading in Paris.
The group, which owns supermarket chains Monoprix, Franprix and Geant, has been closely watched by credit rating agencies because of its high debt burden and weak cash flows.
Supermarket chains in France have to contend with soaring inflation and consumers trading down to cheaper products and buying less. Analysts have said this is particularly worrying for Casino because it cannot afford to cut prices as much as competitors, while its Monoprix chain’s premium positioning could make it vulnerable in a downturn.
In October S&P ratings downgraded Casino’s rating from B to CCC+, and warned that its “ability to meet its future debt maturities is dependent upon favourable business, financial, and economic conditions.”
Casino appointed Itaú BBA, BTG Pactual, JPMorgan, Banco Bradesco, Banco Safra and Santander to work on the divestment. In June, it sold a majority stake in renewable energy business GreenYellow.
In 2019, Naouri put the holding companies through which he controls Casino — Rallye, Finatis and Foncière Euris — into court-protected debt restructuring. Known as a procedure de sauvegarde under French law, it is similar to a bankruptcy proceeding and gives Naouri a decade to pay down debts. He also got a two-year extension on payments because of the Covid-19 pandemic.
Casino itself also remains heavily indebted, with a net debt-to-ebitda ratio of about 7.2 times, according to Fitch Ratings. This is expected to come down to about 6 times next year thanks to asset sales.
Shares are down by about 50 per cent this year to €11.60 per share, lagging behind larger French rival Carrefour, whose stock is up about 2 per cent.