Italy- based cooperative Conad acquired almost all assets from Auchan in Italy. It obtained 1,600 stores; which included hypermarkets, supermarkets, convenience stores and 18,000 employees. The acquisition will be completed by the end of July. Conad said it aims to complete the integration by the end of 2021.
Conad purchasing Auchan assets in Italy
Auchan reported that considerable losses had been made over a few years, with a significant loss of €1.1 bn in 2018. The substantial loss is due to the high levels of competition in the Italian market, including the popular discounters such as; Eurospin, Aldi and Lidl.
The growth of Conad was over 45% (between 2009 and 2018), which saw a turnover of €9.3 bn to €13.5 bn. With an investment of €1.3 bn, including €530m allocated to 2019 Conad has set out a three-year investment plan.
Conad integration proposal
Auchan specialised in hypermarkets, which failed to attract a high volume of customers. Conad is aiming to complete the transaction by the end of July, the repurchase transaction will be finalised. The profitable stores will be integrated into the Conad network, by the end of the year. The stores with a loss will be investigated and rationalised before proceeding with the revival.
The approach taken for integrating will be a decentralised model linked to the territory applied, because Francesco Pugliese, Conad’s managing director stated, ‘we are convinced that the negative results obtained are primarily attributable to the errors of the management’. Auchan used a centralised model and ignored that the Italian market is interested in locally supplied produce. Furthermore, an audit will be conducted against each Auchan hypermarkets to estimate the potential return to profitability. The boss of Conad has stated by the end of the year a specific point will be made for each store.
Consequences of the takeover
Hypermarkets in Italy is a tough channel to operate in, Auchan had 46 hypermarkets. Before obtaining Auchan assets Conad had 27 hypermarket stores. Auchan’s current employees raise concerns that there will be multiple store closures. The management of the cooperative group Conad have declared the desire to ‘conquer market shares with the least amount of impact on the workforce.’ Potentially there would be store closures if the stores are not profitable if kept opened and would be better equipped for another use.