Casino valuation confirmed in market transactions

All,

Two pieces of news over the weekend from European retailers are fundamentally confirming current valuations of Casino:

1) Metro received an unsolicited bid from EP Global Commerce, a vehicle controlled by a Czech billionaire. EP Global Commerce owns 11% plus options to acquire an additional 21%. This has been rumoured for a while in the equity market so the bid is only 3% premium to the closing price on Friday. The offer values Metro on 0.3x EV/Sales & 6.5x EV/EBITDA multiples. Financing appears to be in place from BNP, SG and CS.

2) Also over the weekend - Carrefour are exiting their Chinese business - selling an 80% stake for €620m implying a 0.38x EV/Sales multiple or 20x EV/EBITDA. China has been a drag on the Group margins for a while, so exit is seen as a necessity from equity investors for a while. Will also move some debt off balance sheet (China was fully consolidated).

None of these stories relate directly to Casino, but it is reassuring to see transactions in the space. Carrefour are in year 1 of a 5year turnaround plan so this transaction allows them further cashflow to deal with the plan. The Metro news, although unlikely transaction will occur at current prices, points to implied better valuation for European retail equity.

At either valuation, (Carrefour China struggling with margin in a market not doing as well as it used to and Metro with overall low profitability for some time) Casino’s France Retail business is arguably accurately undervalued at an implied EV/Sales of 0.3x and EV/EBITDA of 6.3x (FCF break even only). Note that the higher valuation for Casino’s China business is also for a controlling stake, which is what Rallye holds in Casino.

Tomas is your analyst.

Wolfgang