Carrefour - 2017 Registration Document

MANAGEMENT’S DISCUSSION AND ANALYSIS AS OF DECEMBER 31, 2017 Other information 2017 REGISTRATION DOCUMENT | CARREFOUR 4. 184 Subsequent events 4.4.4 “Carrefour 2022” transformation plan On January 23, 2018, the Carrefour group unveiled its transformation plan based on four pillars: Deploy a streamlined and open organisation; ● Achieve productivity and competitiveness gains; ● Create a leading omni-channel universe; ● Overhaul the offering to promote food quality. ● In the first pillar, the Group’s headquarters around the globe will be scaled back in order to improve teams’ operational efficiency and responsiveness: In the Île-de-France region, the corporate headquarters in ● Boulogne will be closed and a project to build a new 30,000 square-metre headquarters in Essonne will be abandoned; A strictly voluntary redundancy plan will be offered to ● 2,400 employees at the headquarters in France, out of a total workforce of 10,500; In Belgium, the measures announced on January 25, 2018 to ● reduce expenditure and operating costs and to increase operational efficiency could have an impact on jobs. Any implementation of these measures, which could impact up to 1,233 employees, will be launched following the information and consultation procedure in progress with trade unions. A provision will be accrued for the cost of these measures in 2018 when the conditions for recognising such a provision are met. The second pillar aims to regain room for manoeuvre to improve the Group’s efficiency and competitiveness in the interest of its customers. This will involve a significant reduction in its cost base and a more effective, targeted investment policy focused on its growth drivers. As well as a 2 billion-euro cost reduction plan, the roll-out of this pillar will eliminate certain loss centres. Struggling stores will exit the Group’s scope of consolidation. These include the network of 273 ex-Dia stores which have experienced great difficulties. A search for buyers has been or will be launched. In the absence of buyers, the stores will be closed. The property and equipment of the stores concerned have therefore been written down in the Consolidated Financial Statements for the year ended December 31, 2017 (Note 5.3 to the Consolidated Financial Statements). Strategic partnership in China On January 23, 2018, Carrefour announced that it had signed a term sheet with Tencent and Yonghui regarding a potential investment in Carrefour China. The planned transaction, which is subject to the finalisation of further due diligence and the agreement of the parties on the definitive terms of the complete legal documentation, would allow Carrefour to remain Carrefour China’s largest shareholder and to continue to control the company. The potential investment would leverage Carrefour’s retail knowledge with Tencent’s technological excellence and Yonghui’s operational know-how and in particular its deep knowledge of fresh products. Also on January 23, 2018, Carrefour and Tencent announced that they had signed a preliminary agreement regarding strategic business cooperation in China in order to bring together Carrefour’s retail knowledge with Tencent’s digital expertise and innovation capabilities. Thanks to this partnership, Carrefour would improve its online visibility, increase the traffic of its offline and online retail activities, and benefit from Tencent’s advanced digital and technological expertise to develop new smart retail initiatives. Strategic partnership with Showroomprivé On January 11, 2018, Carrefour announced that it had signed a strategic agreement with Showroomprivé, Europe’s second-largest online private sales player. This partnership is part of both groups’ strategy of developing a leading omni-channel offering, and will notably cover areas such as sales, marketing, logistics and data. In order to seal the partnership, Carrefour acquired 16.86% of Showroomprivé’s share capital on February 7, 2018. This took the form of an off-market acquisition of the block of shares owned by Conforama, a Steinhoff group subsidiary, at a price of 13.5 euros per share, for a total amount of around 79 million euros. An additional payment will be made by Carrefour to Conforama should Carrefour launch a takeover bid for Showroomprivé within 18 months of the completion of the transaction. This transaction was granted an exemption from the obligation to launch a public offer by the French financial markets authority (AMF). Upon completion of the transaction, Carrefour will replace Conforama in the current shareholders’ agreement between the founders of Showroomprivé and Conforama, under an agreement whose main terms are identical to the existing pact between the founders and Conforama/Steinhoff. The founders will retain 27.17% of the capital and 40.42% of the voting rights. Carrefour will hold 16.86% of the capital and 13.67% of the voting rights. The shareholders’ agreement contains provisions relating to (i) the composition of the Board of Directors (11 Directors and one non-voting Director, including five appointed by the founders among whom the Chairman who has a casting vote and one Director and one non-voting Director appointed by Carrefour, as well as five Independent Directors); (ii) an undertaking of the parties to maintain the current management; and (iii) possible termination of the shareholders’ agreement in case of persistent disagreement on major strategic decisions, which could lead to the unwinding of the Carrefour investment or a tender offer. The Group considers that its representation on Showroomprivé’s Board of Directors gives it significant influence over the company. Accordingly, the stake acquired by the Group on February 7, 2018 will be accounted for by the equity method in the Consolidated Financial Statements as from that date. No other events have occurred since the year-end that would have a material impact on the Consolidated Financial Statements.