France's Carrefour Will Sell Real Estate, Launch Share Buyback

From Staff Reports

France’s Carrefour SA – the world's biggest retailer after Wal-Mart– is finally tapping the property market to bring up some cash for its shareholders. On Thursday France's Carrefour announced it would sell a chunk of its enormous real estate portfolio through an initial public offering next year and would also sell other assets to fund a huge share buyback.

Carrefour is seeking organic growth in China, MarketWatch reports that Chief Executive Officer Jose-Luis Duran said during a press conference this week. “Organic growth remains our priority in China," Duran said, adding the company plans to open 20-25 hypermarkets in the country a year. Duran also said Carrefour is still seeking a partner in Russia.

As for its real-estate unit, Carrefour Property – made up of 280 hypermarkets and 540 supermarkets – is worth between $27 billion and $33 billion, according to Forbes magazine. Carrefour will keep 80% of the unit, and sell the remaining 20% for roughly $4.1 billion between now and the end of next year.

Carrefour is looking to generate an additional $2 billion by selling hypermarkets in Portugal, all its operations in Switzerland, and other assets in other countries. All told, the company is seeking to launch a $6.2 billion share buyback.

Shrewd investors predicted this – and acted on that investor intuition. French billionaire Bernard Arnault teamed up with Colony Capital LLC, a U.S. real estate investor, to by 10% of Carrefour, and reportedly pressured the firm to sell real estate assets. But the deal will only get done if the worldwide credit crisis allows it to happen.

Carrefour said its first half net income rose 3.3% to $991 million, while sales rose 5.5% to reach $53 billion.

Related Stories and Links: