Casino - Approval paves way for further buybacks
All,
Please find our analysis here.
The approval by French competition authority for the purchase of Leader Price by Aldi France paves the way for the deal to complete this month, and for further debt repurchases/tenders to take place prior to year-end. We were surprised that more bonds were not tendered into the offer by Casino earlier this month, but we are convinced that Casino will attempt further buy-backs prior to year in order to meet their year-end Gross Leverage covenant on the (undrawn) RCF.
As a recap, Casino announced that they purchased €222m of face bonds via their tender process. This is less than the maximum of all of the 2021 plus €150m of the 22, 23 and 24 bonds. We expect there will be another round of tender prior to year-end in order to meet the Gross leverage covenant requirement. The Company are required to get Gross leverage at the French level down to 5.75x, which depending on EBITDA assumption is c. €4.7-4.8bn at the France Retail and E-Commerce level. After this transaction, Gross Debt via the bonds at Casino France totals €4,884m, to which debt at Segisor (c.€190m) plus Commercial Paper (€200-300m) plus E-Commerce Gross Debt (c. €300m) has to be added. This implies Casino need to buy back c.€700-€1bn of further debt by year-end.
This level of buyback might be at the high end of model, with EBITDA likely to beat prior year into year-end. However, for certain, the Company will need to close the Leader Price transaction and with the proceeds, c. €650m, make debt purchases prior yo year-end.
Aldi received approval for the purchase of all of Leader Price on the condition that 9 stores (either Leader Price or Aldi) are sold in specific areas of France. Casino have not confirmed if this will result in a marginal reduction in price, but this paves the way for the deal to close this month as expected, and further bond buy-backs expected prior to year-end.
Happy to discuss.
Tomás
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