Shares in several European retailing groups rose sharply yesterday after Carrefour and Promodes of France announced a friendly merger to create Europe's biggest retailing group.
"This operation will put pressure on their competitors to rethink their strategies," said a senior executive in the sector. "I would not be surprised if this resulted in similar moves elsewhere."
The combined entity will overtake Ahold of the Netherlands and Germany's Metro to become the world's second largest retailer after Wal-Mart of the US. Shares of Spanish hypermarket chains controlled by the two French groups soared 12 per cent yesterday.
In Frankfurt, shares in Metro rose sharply on speculation that the move by its competitors could increase pressure on it to seek a merger partner. Carrefour dismissed speculation that it was considering merging with Metro. Daniel Bernard, Carrefour's chairman, was head of Metro's French activities in the early 1980s.
In Paris shares of Casino, the largest listed retailer after Carrefour and Promodes, rose more than 6 per cent. Guyenne et Gascogne, a smaller group based in the south-west, closed 2.5 per cent higher at 497. Guyenne has been the subject of takeover rumours.
Mr Bernard, who will head the merged group, said yesterday that concentration in the retailing sector was "less advanced in France than in other countries".
Analysts also said a counter-bid by a bigger rival could not be ruled out. Wal-Mart has made no secret of its international expansion plans after acquiring Asda of the UK.
Shares in Promodes rose 18 per cent to 829, reflecting the 20 per cent premium over Friday's closing price offered by Carrefour's proposed share exchange. Carrefour is offering six of its shares for every Promodes share.
Up to 115 million new Carrefour shares would be issued if all existing Promodes shares were tendered to the offer. The merged entity is to be called Carrefour.
Mr Bernard predicted net profits would double to £2 billion sterling by 2002. In Spain, shares in the listed Promodes subsidiary Continente and Carrefour's Spanish offshoot Pryca were initially suspended from trading.
Continente shares climbed to 24.30 from 21.64. Pryca's shares jumped to 18.95 from 16.90.
