France’s Groupe Casino SA (aka Casino Guichard-Perrachon SA) has just completed a very big sale, a huge sale that is sending vibrations through the global gambling markets. The retail giant has unloaded Vietnam’s Big C grocery stores and not to a Vietnamese or French company. The sale, listed at $1.1 billion, was to a Thai company. That company is Central Group.
The French company has made the sale for a very basic reason. Groupe Casino SA is in debt. The sale is going to cut that debt down. The costs associated with running the retail grocery store are gone. $1.1 billion in liquid capital was gained. There are huge upsides to this deal, but the deal alone is not enough to solve all of Groupe Casino SA’s problems.
Corporate debt can come from a host of different sources. Many different factors can contribute to the amassing of significant debt. Sluggish sales, poor management decisions, and more can all lead to a company headed into debt. The French company has run into an inordinate amount of debt in various markets and is facing another problem. Direct attacks from a short seller known as Carson Block has further added to company woes. Selling helps alleviate the various annoying and potential disastrous problems emerging.
As a result, the company has chosen to launch a serious divestment program. The disinvestment is intended to target holdings the company has in both Asia and Latin America. Whether or not disinvesting from these markets turns out to be a good long-term strategy depends on a number of things.
At the present moment, unloading financial troubles is the best decision that Groupe Casino SA could have made. Debt ridden companies cannot continue to run huge overheads. They also need to liquidate assets to address other debts. Groupe Casino SA probably plans to repeat this approach with more assets in the coming months.
A similar move was made not too long ago. Groupe Casino SA owned Big C Supercenter Pcl, a major grocery chain in Thailand. The chain was sold for over $3 billion to TCC Holding Co.
Carson Block has publicly made claims that the Groupe Casino SA is in a terrible debt position. The Casino Group does not agree with this assessment, but the claim has been made public. People are inclined to believe the debt situation in lieu of Standard & Poor’s very negative assessment directed towards the company. Specifically, the credit rating for the casino has been dropped all the way down to “junk” status. This is a horrible position for any company to be in, which is why the selloffs are occurring.
For the good of the company, many are hoping these sales do solve the critical debt woes the company is enamored with.
