Dankner Sets Sights on Next Target

... and it's the retail chain Carrefour, with the blessing of its leader

After virtually liquidating his position in Credit Suisse, Nochi Dankner has set his sights on his next investment opportunity. On Sunday Koor's board of directors approved a NIS 3.5 billion purchase of stock in Carrefour, the largest retailer in Europe and the second largest in the world.

Last week Koor bought 0.25% of Carrefour's stock, about 1.8 million shares, for NIS 284 million, after Dankner received the blessing of the retail chain's founder and controlling shareholder, Bernard Arnault.

Sources at Koor say the decision was based on prevailing international market conditions and business opportunities, with an eye to the company's high liquidity and its strategy of pursuing investment opportunities.

But the purchase was not a whim, just as his investment in Credit Suisse wasn't: It followed intense study of the Swiss bank and market. Dankner and a team from IDB reportedly looked at the potential investment in Carrefour for about a year, during the second half of which Dankner met with Arnault several times. He also reportedly looked at potential investment in other European retail chains (reportedly, Britain's Tesco was in his sights) before choosing this one.

Now is an opportune time, as Carrefour's profits have been hovering because of the economic crisis. However, the chain's new management, under Lars Olofsson (who hailed from Nestle), is carrying out a sweeping efficiency program that should improve profitability in the future, Dankner must be hoping.

Carrefour has over 15,000 stores in 33 countries. Its market cap, as of the close of business Friday on the Euronext exchange, was about 20.75 billion euros. To finance the share purchase, Koor has an agreement in principle with HSBC for a 300 million euro recourse line of credit. The company means to pay about half out of its own resources. The transaction is subject to market conditions and the final scope of the investment is not certain, Koor qualifies.

If Koor goes ahead with the deal to buy a 3.5% stake in Carrefour, it would become the second-biggest shareholder, after Arnault himself.

News of the Israeli company's interest sent Carrefour stock climbing 1.3% on the Paris exchange yesterday.

In 2007 Carrefour achieved turnover of ?82 billion. Last year that figure climbed to ?87 billion, of which it netted ?1.3 billion.

Not a den of kittens

Carrefour was founded by Bernard Arnault, who retains a 14% controlling interest held together with Colony Capital. Arnault owns his shares through Groupe Arnault. The chain has helped make Arnault the richest man in France.

Arnault controls 60 brands through the luxury goods giant LVMH - Louis Vuitton Moet Hennessey, which he also controls. During the decades since his leap into the luxury goods market, Arnault has become a brand in his own right. He serves as unofficial ambassador of France's private sector, in part thanks to his close relations with Nicolas Sarkozy, even serving as a witness at the French president's wedding to his former wife, Cecilia.

In 2008, when Chinese consumers boycotted French goods following protests in Paris against the choice of Beijing as venue for the Olympic Games, Arnault volunteered to represent the French government and industry. His visit to China, however, also had a personal interest: Both Carrefour and LVMH are striving to aggressively expand in China.

Arnault has had his share of bad press, thanks to aggressive tactics when taking over LVMH, in one of the more notorious control battles in French history. At first he invested, then allied with Louis Vuitton's long-time chairman Henri Racamier, who was also the No. 2 at LVMH. Racamier was battling other shareholders, the family owning Moet-Hennessey, over control of the company. First Arnault helped Racamier oust Moet-Hennessey. Then he bought enough shares himself to become the biggest shareholder in LVMH, and began a legal battle to get rid of Racamier. It worked.