Newspaper article The Evening Standard (London, England)

Kingfisher's French DIY Deal Is Hard to Assemble

Newspaper article The Evening Standard (London, England)

Kingfisher's French DIY Deal Is Hard to Assemble

Article excerpt


SIR GEOFFREY MULCAHY, the chief executive of Kingfisher, looks unlikely to win any prizes at this year's French bricolage - do-it-yourself - championships. Like many an enthusiast, Mulcahy has discovered that his ?3.2 billion tidying-up project to mop up the outstanding 45% of French DIY chain Castorama is fraught with unforeseen difficulties, and now looks set to take far longer, and cost rather more, than anticipated.

For not only has Kingfisher apparently misunderstood the Castorama operating instructions, but Mulcahy, and his assertive new chairman Francis Mackay, have fallen out with Castorama boss Jean-Hugues Loyez, a necessary collaborator in the project.

Loyez, the long-serving Castorama executive chairman, has adopted a stonewall strategy worthy of any time-served artisan. Thanks to months of fruitless talks, he has had ample opportunity to prepare his tools. So within hours of the announcement that Kingfisher planned a bid for the outstanding shares, his lawyers were making their depositions at the Lille tribunal of commerce.

Back in 1998, Mulcahy thought he had a good deal when he injected his British DIY chain B&Q into Castorama Dubois Investissements in exchange for 54% of the shares.

Castorama, with 15,000 employees, was clear leader in the French DIY market, and Kingfisher had a 20-year option to snap up the minorities at a price to be set by an independent merchant bank adviser.

But Lille's commercial lawyers are masters of their craft. And according to Loyez, the new articles of association for CDI, drawn up at that time, clearly state that Kingfisher must have its financing in place before any offer is tabled.

In a calm but lengthy discourse to his shareholders at yesterday's annual general meeting in the company's headquarters on an industrial estate in the northern French town, Loyez reasoned that Castorama shareholders could quickly see their shares slump if Kingfisher failed to get the cash nailed down. …

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