Auchan Nears Exit from Russia, Enters Final Stage of Sale Negotiations
Source: DairyNews.today
Auchan, one of the last remaining French retailers in Russia, is poised to complete its withdrawal from the market. The company has identified a local buyer and is now in the final phase of negotiations to exit the country, marking a significant move in the retail landscape.
French retailer Auchan is on the brink of completing the sale of its Russian subsidiary, marking a pivotal moment in the company's operations. According to reports fr om La Lettre, Auchan has entered the final phase of negotiations with a local buyer, with the deal expected to close in the coming weeks. While the identity of the buyer remains confidential, the transaction represents a significant move in the company’s global restructuring efforts.
However, Auchan must still navigate Russia’s stringent government approval process, which oversees foreign asset sales. Russian government commissions, often influenced by Kremlin-affiliated buyers, are known to push for price reductions to benefit domestic purchasers. This presents an additional layer of complexity as Auchan seeks to finalize the sale.
Strategic Decisions Amid Political and Market Shifts
While Auchan moves forward with its exit from Russia, the company has made the politically sensitive decision to maintain its presence in Ukraine. Auchan operates 43 stores in Ukraine, including a mix of hypermarkets, as part of its broader commitment to supporting local economies despite ongoing geopolitical tensions. In addition, the retailer is contemplating a potential exit from Hungary, wh ere market conditions have also grown challenging.
Economic Pressures Amplify Financial Strain
The decision to remain in both Ukraine and Russia, despite the Russian invasion two and a half years ago, was reiterated by Auchan’s leadership as recently as February. Ludovic Delcloy, CFO of Auchan Retail, stated during the company’s annual financial presentation, “We will continue to serve civilians and support our employees in both Ukraine and Russia, while adhering strictly to embargo measures.” This position was maintained even as other Mulliez family-owned brands like Decathlon and Leroy Merlin chose to exit the Russian market.
Despite this stance, economic conditions have deteriorated further. Russia, which accounts for around 10% of Auchan’s global revenue—over €3 billion—has seen a significant drop in sales. Combined revenues from Russia and Ukraine fell by 4.2% last year, dragging overall Auchan Retail revenues down by 2%. Without these markets, the company could have posted a 4% revenue increase. These challenges contributed to Auchan’s overall net loss of €378 million for the year.
Managing Complex Sales Amid Market Uncertainty
Former Auchan CEO Edgard Bonte, who led the company from 2018 to 2021, has been at the forefront of negotiations to sell the company’s Russian operations. After months of discussions, Auchan entered advanced talks in September with a potential Russian buyer. Bonte’s involvement in these negotiations follows a history of complex asset sales during his tenure, including the controversial sale of Auchan’s Italian subsidiary to Conad in 2019. That deal left Auchan with €900 million in debt and required an additional €600 million payment to offload the asset.
The Mulliez family, represented by Barthélémy Guislain, president of the Association Familiale Mulliez (AFM), remains cautious about the financial implications of the Russian exit. While the sale of Auchan’s commercial assets in Russia is expected to yield less than €200 million, the real estate attached to the 94 hypermarkets and 138 supermarkets could significantly boost the value of the transaction.
Nonetheless, Auchan, like many foreign companies exiting Russia, is not in a strong bargaining position. The urgency to complete the sale is heightened by Russia’s increasing “exit tax,” which recently rose from 10% to 15% and could climb as high as 35%, according to Russian economic daily RBC.
Hungary: A Parallel Challenge
Auchan’s difficulties are not confined to Russia. In Hungary, the company faces a similarly precarious situation. Since 1998, Auchan has operated 24 stores in Hungary, generating approximately €1.3 billion in revenue. However, Hungarian Prime Minister Viktor Orbán has made it clear that he wants foreign retailers to sell their assets to Hungarian companies closely aligned with the government. Orbán has imposed a 4.5% tax on the revenues of large foreign retailers and implemented price caps on basic food items, ostensibly to combat inflation but also to undermine competition.
In October 2023, Auchan, under the guidance of Edgard Bonte, sold 47% of its Hungarian subsidiary to Indotek, a company owned by Dániel Jellinek, a close business associate of Orbán’s son-in-law. In a parallel move, Auchan also sold the real estate associated with its shopping centers. This complex arrangement has made it more challenging for Auchan to sell its remaining 53% stake in the Hungarian subsidiary, further complicating its efforts to streamline operations.
Navigating Financial and Strategic Risks
As Auchan works through its exit from Russia and faces continued challenges in Hungary, the Mulliez family must carefully balance these strategic divestitures to avoid further financial strain. With the company’s global operations already impacted by geopolitical and economic turbulence, successful negotiations in these key markets are critical to mitigating future losses and stabilizing the business.
However, Auchan must still navigate Russia’s stringent government approval process, which oversees foreign asset sales. Russian government commissions, often influenced by Kremlin-affiliated buyers, are known to push for price reductions to benefit domestic purchasers. This presents an additional layer of complexity as Auchan seeks to finalize the sale.
Strategic Decisions Amid Political and Market Shifts
While Auchan moves forward with its exit from Russia, the company has made the politically sensitive decision to maintain its presence in Ukraine. Auchan operates 43 stores in Ukraine, including a mix of hypermarkets, as part of its broader commitment to supporting local economies despite ongoing geopolitical tensions. In addition, the retailer is contemplating a potential exit from Hungary, wh ere market conditions have also grown challenging.
Economic Pressures Amplify Financial Strain
The decision to remain in both Ukraine and Russia, despite the Russian invasion two and a half years ago, was reiterated by Auchan’s leadership as recently as February. Ludovic Delcloy, CFO of Auchan Retail, stated during the company’s annual financial presentation, “We will continue to serve civilians and support our employees in both Ukraine and Russia, while adhering strictly to embargo measures.” This position was maintained even as other Mulliez family-owned brands like Decathlon and Leroy Merlin chose to exit the Russian market.
Despite this stance, economic conditions have deteriorated further. Russia, which accounts for around 10% of Auchan’s global revenue—over €3 billion—has seen a significant drop in sales. Combined revenues from Russia and Ukraine fell by 4.2% last year, dragging overall Auchan Retail revenues down by 2%. Without these markets, the company could have posted a 4% revenue increase. These challenges contributed to Auchan’s overall net loss of €378 million for the year.
Managing Complex Sales Amid Market Uncertainty
Former Auchan CEO Edgard Bonte, who led the company from 2018 to 2021, has been at the forefront of negotiations to sell the company’s Russian operations. After months of discussions, Auchan entered advanced talks in September with a potential Russian buyer. Bonte’s involvement in these negotiations follows a history of complex asset sales during his tenure, including the controversial sale of Auchan’s Italian subsidiary to Conad in 2019. That deal left Auchan with €900 million in debt and required an additional €600 million payment to offload the asset.
The Mulliez family, represented by Barthélémy Guislain, president of the Association Familiale Mulliez (AFM), remains cautious about the financial implications of the Russian exit. While the sale of Auchan’s commercial assets in Russia is expected to yield less than €200 million, the real estate attached to the 94 hypermarkets and 138 supermarkets could significantly boost the value of the transaction.
Nonetheless, Auchan, like many foreign companies exiting Russia, is not in a strong bargaining position. The urgency to complete the sale is heightened by Russia’s increasing “exit tax,” which recently rose from 10% to 15% and could climb as high as 35%, according to Russian economic daily RBC.
Hungary: A Parallel Challenge
Auchan’s difficulties are not confined to Russia. In Hungary, the company faces a similarly precarious situation. Since 1998, Auchan has operated 24 stores in Hungary, generating approximately €1.3 billion in revenue. However, Hungarian Prime Minister Viktor Orbán has made it clear that he wants foreign retailers to sell their assets to Hungarian companies closely aligned with the government. Orbán has imposed a 4.5% tax on the revenues of large foreign retailers and implemented price caps on basic food items, ostensibly to combat inflation but also to undermine competition.
In October 2023, Auchan, under the guidance of Edgard Bonte, sold 47% of its Hungarian subsidiary to Indotek, a company owned by Dániel Jellinek, a close business associate of Orbán’s son-in-law. In a parallel move, Auchan also sold the real estate associated with its shopping centers. This complex arrangement has made it more challenging for Auchan to sell its remaining 53% stake in the Hungarian subsidiary, further complicating its efforts to streamline operations.
Navigating Financial and Strategic Risks
As Auchan works through its exit from Russia and faces continued challenges in Hungary, the Mulliez family must carefully balance these strategic divestitures to avoid further financial strain. With the company’s global operations already impacted by geopolitical and economic turbulence, successful negotiations in these key markets are critical to mitigating future losses and stabilizing the business.
