PARIS—French retailer Carrefour SA and Canada’s Alimentation Couche-Tard Inc. said they are discussing a potential tie up that could create a $53 billion grocery and convenience store giant, as large retailers come under pressure to transform their bricks-and-mortar footprint amid pandemic restrictions on shopping and disruption from tech giants.

A merger would forge the world’s third largest grocery retailer, behind Walmart Inc. and Lidl owner Schwarz Group, while combining two companies with very different formats and geographical footprints. Retailers are in a rush to find new ways to get food to customers ordering online as the spread of Covid-19 has massively accelerated online grocery shopping, including click-and-collect.

Carrefour—which opened its first store in 1960—is one of Europe’s largest grocery retailers. It also operates hypermarkets and supermarkets in Asia and Latin America. The 31-year-old Couche-Tard is the largest independent convenience store operator in North America, operating under brands such as the Corner Store, Circle K and Holiday. It also operates a network of gas stations in Europe and has stores there and elsewhere in the world.

Carrefour shares were up 15% at 17.76 euros, equivalent to $21.68, in midday trading in Paris on Wednesday, giving the company a market capitalization of €14.7 billion. Couche-Tard shares closed down 2.2% at 41.31 Canadian dollars, equivalent to $32.50, on Tuesday in Toronto, valuing the company at around C$46.1 billion.

Jefferies analyst James Grzinic said he was a little blindsided by the talks, saying it was hard to map out synergies because overlap between the retailers is virtually nonexistent. He described the talks as a major departure from Couche-Tard’s stated strategy of maintaining return on capital employed at above 15%.

This post first appeared on wsj.com

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PARIS—French retailer Carrefour SA and Canada’s Alimentation Couche-Tard Inc. said they are discussing a potential tie up that could create a $53 billion grocery and convenience store giant, as large retailers come under pressure to transform their bricks-and-mortar footprint amid pandemic restrictions on shopping and disruption from tech giants.

A merger would forge the world’s third largest grocery retailer, behind Walmart Inc. and Lidl owner Schwarz Group, while combining two companies with very different formats and geographical footprints. Retailers are in a rush to find new ways to get food to customers ordering online as the spread of Covid-19 has massively accelerated online grocery shopping, including click-and-collect.

Carrefour—which opened its first store in 1960—is one of Europe’s largest grocery retailers. It also operates hypermarkets and supermarkets in Asia and Latin America. The 31-year-old Couche-Tard is the largest independent convenience store operator in North America, operating under brands such as the Corner Store, Circle K and Holiday. It also operates a network of gas stations in Europe and has stores there and elsewhere in the world.

Carrefour shares were up 15% at 17.76 euros, equivalent to $21.68, in midday trading in Paris on Wednesday, giving the company a market capitalization of €14.7 billion. Couche-Tard shares closed down 2.2% at 41.31 Canadian dollars, equivalent to $32.50, on Tuesday in Toronto, valuing the company at around C$46.1 billion.

Jefferies analyst James Grzinic said he was a little blindsided by the talks, saying it was hard to map out synergies because overlap between the retailers is virtually nonexistent. He described the talks as a major departure from Couche-Tard’s stated strategy of maintaining return on capital employed at above 15%.

This post first appeared on wsj.com

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