The deal Jean-Charles Nouri signed this month to try to rescue his indebted French supermarket group Casino has its roots in a fateful meeting with a business school graduate some 30 years ago.
Called by some the “Godfather of French retail,” he called 25-year-old franchisee Moise-Alexandre Zouari, wanting to know how the young entrepreneur’s ambitious plan to open 100 stores in apparently saturated city-center markets was possible? good idea
“I told him that I had tested it with my wife, and we felt that you need a store every 300 meters or so because city dwellers cannot carry heavy groceries that far,” Zouari recalled. Nouri, a trained mathematician, “did a quick calculation in his head and saw an opportunity”, and soon invested to help Zouari expand.
After working together in various forms since then, Nouri, 74, is now making another big bet on an idea Zouari created as the executive tries to save his once-sprawling empire in order to pay off debt next year.
The complex deal will merge Casino’s French food retailers with Teract, which Zouari founded last year through a spac deal with two prominent French businessmen. It provides a financial lifeline that also allows Nouri to save face because it is not a complete sale.
The pair’s longstanding relationship may have made Zouri the only person who could convince Nouri to relinquish his grip on the casino, people close to the deal said.
“All the other deals that Nouri had to pick up so far were going to hurt him,” Zouari told the Financial Times, referring to approaches from rivals Carrefour and Auchan. “People don’t understand that he’s not just a financier, he’s very attached to the company he built.”
Nouri, described as prickly and independent by those who know her, has come to trust Zauri. “He has the ability to focus on details and also has a vision for the future of retail,” Nouri told the Financial Times. “I have great respect for him as a professional . . . and have come to consider him a friend.”
Nouri is part of a generation of French businessmen, including Vincent Bolloré and Bernard Arnault, who used sophisticated financial engineering to build business empires through debt-fueled acquisitions. But the retail sector has been decimated by ecommerce and price wars over the past decade, and its business has not generated enough cash to support its debt levels.
The casino, whose market value has fallen from a peak of €11bn in 2014 to less than €1bn, has been scrambling to sell assets to pay down debt, including its recent stake in listed Brazilian business Acai.
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If the deal is finalised, Casino will spin off its French retail operations and combine Teract, a listed company owned by Zouari, with tech billionaire Xavier Neal, banker Mathieu Pigasse and InVivo, France’s largest farmers’ cooperative.
The two sides announced exclusive negotiations earlier this month but neither disclosed a valuation nor how much casino debt would be transferred. Teract will inject at least €500mn into the venture.
People familiar with the deal said the combined retail business would be put into one entity, with Nouri as chief executive and the casino owning 60 percent to 40 percent of Teract.
The second entity will act as a central purchasing platform to supply retail stores with locally grown fruits and vegetables, wine and baked goods from InVivo’s 300,000 farmers. Zouari will lead it, with Teract and its backers owning 40 percent of 60 percent of the casino.
The idea is to create a vertically integrated retailer to appeal to consumers who are willing to pay a premium for sustainable, locally sourced food.
Investors reacted with skepticism on the morning of March 10, hours after the deal was announced and hours after the casino announced weak annual results the same day. One hedge fund manager who has been short casinos said the “half-baked deal announcement” was an attempt to distract from the group’s cash burn.
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Analysts at Barclays said they “struggle to see the benefits of a potential combination with Teract and remain disappointed about the casino’s performance in France”.
But the benefits are likely for Nouri, who has controlled the casino through a series of holding companies that have been in court-protected debt restructuring since 2019. Nouri is betting that the deal will revive casinos and accelerate market share losses, which could help. He persuaded judges overseeing restructuring proceedings of holding companies to give creditors more time to pay.
Casino faces debt maturities of €1.2bn in 2024 and €1.8bn in 2025. Another €1.9bn is owed to holding company Rallye in 2025.
Unsurprisingly, negotiations over how much casino debt would be placed on the new retail group proved straightforward as Nouri promised to cap it at two times earnings before interest, taxes, depreciation and amortization, Zouari said. “We thought that would be the hardest part of the negotiations but in the end it wasn’t.”
Analysts at Brian Garnier expect €2.2bn of the casino’s secured debt with banks to go to the new venture and warn that the casino risks losing shareholders and unsecured creditors. Meanwhile, Teract would be well-placed to acquire assets on the cheap should Nouri prove unable to pay his debts.
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On a more personal level, the transaction may give Nouri an answer to the thorny question of his successor. The casino boss regards Zuari as a “spiritual son”, according to a person who has worked closely with the two.
The deal also caps Zuari’s rise to the upper echelons of France’s business world after he and his wife, Soraya, spent decades building their company in the shadow of casinos. His wealth was estimated at €1bn last year by business magazine Challenge, placing him 113th in France, while Nouri dropped out of the rankings.
When the Franco-Tunisian entrepreneur fulfilled his pledge to open 100 Franprix stores after 10 years, Nouri invited him to lunch in the grand dining room of the exclusive Hotel Bristol. “I wasn’t used to such grandeur,” Zouari recalled.
It became the casino’s largest and most profitable franchise, with a peak of nearly 500 stores jointly owned by the two companies with Nouri. Nouri initially bankrolled the expansion in exchange for a minority stake.
In 2019 Zouari began selling some of his shares to Nouri, using the proceeds to diversify his family’s business through acquisitions. The following year he bought a controlling stake in the frozen food chain Picard’s, and Neal and Pigas teamed up to form the spec that would become Teract.
When they go to see Nouri as they hunt down his first target, he makes it clear that he doesn’t want to sell his company in pieces. Yet when the trio announced a deal to merge with InVivo’s retail arm last year, Nouri congratulated Zouari.
“He is a man of few words so such messages are rare,” Zouari said. “I thought he was sending me a subtle message that he was interested in our project.”
It proved true – about six months later they began negotiations for their next joint venture.
Additional reporting by Robert Smith in London
