PARIS — French Economy and Finance Minister Bruno Le Maire on Thursday denied his decision to block a Franco-Canadian merger between retail giants had anything to do with domestic politics — but the words he chose were music to French voters’ ears.
Earlier this year, Le Maire derailed the takeover of France’s flagship supermarket chain Carrefour by Canada’s Alimentation Couche-Tard, in a move that left France’s business community puzzled.
Le Maire killed the deal by threatening to use his reinforced investment screening power in the name of “food security,” arguing that the takeover would have put in danger France’s food supply and made the country more vulnerable in future crises such as the current one.
“I didn’t do politics, and I want to make that very clear: I have defended the interests of an agricultural and food model which for ten years … I have been viscerally attached to,” Le Maire said in an interview with POLITICO’s Playbook Paris, noting that he had no guarantees that Couche-Tard would have kept sourcing products from French farmers.
“I’m not taking any risk on the back of French farmers,” Le Maire said. “The demand for protection from the French is very strong and it is legitimate,” he added.
His words are unlikely to assuage the business community’s concerns that Le Maire has taken a turn towards a more protectionist policy — with the 2022 election cycle in mind.
The reasoning is that France’s public opinion would hardly digest the idea of letting a French flagship company fall in the hands of a foreign buyer — especially in the middle of an economic crisis and the digital transition that are likely to result in layoffs, even among supermarket cashiers.
“You can easily imagine [France’s far-right leader] Marine Le Pen explaining that Carrefour, the only French leader in European retail, had passed under the Canadian flag in the middle of the crisis,” as someone from the industry directly involved in the takeover put it.
French President Emmanuel Macron’s number one adversary, Le Pen already has used that weapon in the past — for the planned takeover of French shipyard Chantiers de l’Atlantique by Italy’s Fincantieri. This time Le Maire is suspected to have tried to disarm her in advance.
Le Maire’s burst of economic patriotism has already earned him the approval of French farmers.
“Citizens just as farmers are afraid of a too open economy, of extreme liberalism. It doesn’t fit with the French culture,” said Arnold Puech-d’Alissac, a member of the board of France’s main farmers’ lobby.
The farm lobbyist reckoned that food security was not at stake, noting that the deal left French farmers relatively indifferent.
“I don’t see any food risk,” said Puech-d’Alissac, adding that French farmers “were not excited for the government intervention nor for Couche-Tard’s offer” and decided to back the government mostly to get, in exchange, Paris’s support in the ongoing fight with food retailers on prices.
Le Maire argues otherwise.
“French sovereignty was threatened in the sense that there was no guarantee that, if Couche-Tard bought out Carrefour, it would maintain this close link between mass distribution, meaning Carrefour stores, and French producers of meat, milk and vegetables,” the minister said.
The French business community is worried that the government is sending the wrong message to foreign investors interested in French companies, but Le Maire rejects that narrative.
“It’s important that all investors .. coming from Asia or Canada … know that the finance minister doesn’t take decisions driven by French internal politics. They are driven by an economic model to which we are attached,” Le Maire told POLITICO.
Business community unconvinced
Both Carrefour and Couche-Tard bosses said they were unconvinced by Le Maire’s food security argument and said his veto was rushed.
Other business leaders also didn’t buy Le Maire’s line.
“Even trying to find the rationale [behind the Carrefour-Couche-Tard decision] I must confess I haven’t found any,” said Henri de Castries, a former AXA boss and French businessman who sits in the board of several listed companies, in an interview last month.
“At best it’s very short-term sighted, very tactical. It’s a negative signal which is offsetting some of the good moves that had been made before. This decision is inconsistent with all the efforts which are being made [to turn France into] an attractive territory,” he added.
Attracting foreign investment has been a top priority of Macron. According to a report by consulting firm EY, Macron succeeded in his bid to make France more attractive as the country ranked first in foreign direct investment (FDI) attractiveness in 2019.
Over the past years, France as well as all other major EU countries have been strengthening their investment screening powers to shield strategic companies from foreign takeovers. Antitakeover powers around Europe got even tougher during the pandemic, with the blessing of Brussels.
Since October, EU countries are supposed to consult the Commission and other member countries on foreign investments which are undergoing screening. Le Maire’s veto came before any screening procedure even started.
Asked whether France consulted Brussels on the Carrefour/Couche-Tard deal, a European Commission spokesperson explained that investment screening procedures are confidential.
Lobbying in vain
The two retail giants — which have now abandoned the deal but say they are working on a partnership — tried to anticipate the risk of a political veto by boosting their lobbying efforts.
In a bid to establish a dialogue with French authorities, Couche-Tard hired public affairs firm Lysios in January, according to someone directly involved in the deal, while Carrefour recruited Charles Hufnagel, who served as communication adviser for former prime minister Edouard Philippe, in the hope that it would facilitate negotiations with French officials.
But Le Maire was consulted when Carrefour and Couche-Tard were already close to an agreement and seemingly didn’t like the idea of being informed at the last minute.
“Maybe we could have taken more time, but in that case one should have informed the economy and finance minister since the beginning,” a piqued Le Maire said, adding: “It has not been the case.”
Carrefour’s boss Alexandre Bompard decided not to involve Bercy at an earlier stage to avoid the information leaking to the public, someone involved in the negotiations said.
“They thought that, if they informed the minister, [the information] would have reached the press,” said the same industry person.
Wanted: Digital transformation
Bompard is still hoping to clinch a deal in the coming years and has been thinking for months of a buyout of competitor Casino or the sale of some of Carrefour’s activities. Beyond the interest for shareholders, this strategy is also seen as a way to free up funds to invest in the digital transformation of the group, which sees its business threatened by online retail giants.
“In 10 years, Carrefour will no longer exist because in front of giants like Amazon, we don’t have the critical size,” the industry person said.
Le Maire seems well aware of what is at stake.
“What I hope above all is that there will be a continuation of the modernization and transformation of the model of mass distribution as Alexandre Bompard and others have begun to engage … We have to stop being afraid of [the likes of] Amazon and tell ourselves that we have strengths within us that we are going to put forward,” Le Maire said.