The Clouds Of Danger Are Gathering Over Carrefour's Horizon

Implications: One of the major reasons for Carrefours success thus far is about to become its biggest lability! By keeping its' occupancy costs low through ownership of many of its' locations, Carrefour has managed to pass along the benefits of below market rents to its' shareholders in the form of increased profits.  Now under the plan of the private equity group called Blue Capital, the rents will rise to "market rates" and the "spread" between the market rate rents and the below-market occupancy costs determined by conservative family management, will go toward a front end payment to the Blue Group and other stock holders at that time. Who wins and who loses from this new arrangement?

Analysis: Whenever a private equity group takes a stake in a retailer with lots of owned property, the temptation to try to monetize the owned real estate and pocket the "profits" looms very large. 

Actually the outcome is really no different than any private equity group taking control of any public company and loading it up with debt. This debt is then siphoned off through "management fees" and "special dividends" and the private equity group then unceremoniously dumps the debt-laden company back on the unsuspecting public. 

The only difference in the case of Carrefour is that due to the amount of owned properties, loading the company up with substantial debt will be easier and faster.

I want to alert the GLG News reader to be aware of this pending transaction so that if they can not get in on the action and enrich themselves very quickly, to avoid any involvement with the company after the debt load has been placed.  It is my firm opinion that any investment made AFTER the Blue group has "raided the coffers"  will be the same as betting on a great racehorse who has been burdened with an unreasonable handicap and yet will be touted to win the big race against Wal-Mart and others who are not so handicapped.