Goodbye Coles. Bonjour Carrefour?

Some Australians may take issue with Carrefour’s labour practices overseas. And on first blush that’s expected. But frankly, what Carrefour does in other countries is not only beyond our control but more to the point, Carrefour's behaviour is entirely consistent with local laws. Will those Australians who take issue with foreign labour practices start boycotting all Chinese-made goods, given that sweat shop conditions in Chinese textiles, clothing and footwear factories run by or contracted to leading name brands are reported to offer even worse conditions to their staff?

Carrefour has stores operating nearly everywhere. In the Americas (mostly South America) Carrefour has 835 stores of which 169 are hypermarkets; 149 are supermarkets and 521 are hard discounters. In Africa, Carrefour has five stores of which three are hypermarkets. In Europe, it has a whopping 5,800 stores with a good spread among hypermarkets, supermarkets, convenience stores and hard discounters. In Asia, Carrefour has 471 stores of which 180 are hypermarkets and 234 are hard discounters. The balance is convenience stores and cash-and-carry.

What is particularly interesting is that while Carrefour is global in operations, only 7 per cent of sales are generated in Asia's 471 stores. And for Carrefour, “Asia” stretches from the Red Sea (Saudi Arabia) to the Pacific Ocean (Taiwan). A quick peek at its annual reports reveals a yawning gap in Carrefour’s ever growing retail empire: India and Australia. The latter of which offers not only a major icon up for sale, but an icon whose domicile is a cosy duopoly. Talk about upside potential!

The reality is beginning to dawn on the various players vying for Coles.

The Australian on April 26 reported that Woolworths is considering a tie up with the United Kingdom’s international grocer, Tesco Plc in a joint bid. Woolworths’ links with US retailer Wal-Mart are already well established.

That seems to only leave Carrefour.

KKR could do a lot worse than team up with Carrefour and make a bid for Coles. It could offer current Coles shareholders not only a fair price, but also CGT rollover relief by way of script in any proposed ASX listed joint venture. Imagine for instance, Carrefour Australia: where KKR has 51 per cent; Carrefour 26 per cent and Coles shareholders - who didn’t want a straight cash deal for their shares - 23 per cent.

Such a venture would be a boon for Carrefour, extending its global footprint with most of the capital put up by KKR. It should help KKR bag this deal. And it would be a sound investment by current Coles shareholders. KKR may even consider re-listing its 51 per cent on the ASX in due course, with the proviso of giving existing shareholders first bite of the cerise in any public offer.

Such a scheme has many attractions to KKR, to Carrefour and to existing Coles shareholders. And for those like me who have no shares in Coles, Woolworths or Carrefour whatsoever, while we won’t enjoy any financial gain from a buy out, at least we’ll be able to look forward to our weekly shopping experiences becoming a whole lot plus agréable.