Carrefour's merger of the century with Promodès — a decade on, not one promise stood

At the end of August 1999 Carrefour and Promodès announced a friendly exchange offer — six Carrefour shares for one Promodès share — creating the world's second-largest retailer after Wal-Mart: around €50 billion of revenue, 9,000 stores, 240,000 staff. Carrefour moved defensively, with Wal-Mart threatening even a takeover bid; Promodès arrived wounded from its failed bid for Casino. The pitch promised double-digit growth, net income doubled within three years, and €600 million of synergies.

None of it held. Growth ran at 4.3 per cent a year over the following five years — against 9.4 at Wal-Mart and 12 at Tesco; operating-profit growth was minus 0.1 per cent a year from 2004 to 2007; distribution costs barely moved. The 'merger of equals' spent its energy adapting organisations to each other rather than extracting the promised synergies. The share fell 25 per cent, the debt ratio reached 123 per cent, and Picard, the internet and the property portfolio — the assets that might have paid for the deal — were never exploited.

The Halley family, founders of Promodès, had swapped their controlling stake for Carrefour shares; the family's shareholder pact did not survive the marriage and came apart in 2004 and again in 2008. Ten years on, Les Echos titled its retrospective 'the marriage did not keep its promises' and named the rushed, overpaid valuation the deal's original sin. The group was left with a choice between turnaround and dismantlement.