(News Bulletin 247) – The distributor will return on June 24 to the second largest index of the Paris Stock Exchange, alongside the oil distributor Esso. A return that comes while society still has challenges to overcome.

Less than a year after leaving it, Casino returns to the second most important barometer of the Paris Stock Exchange. Euronext’s scientific council announced its review of the market’s indices on Thursday evening.

If the experts have decided not to make any changes to the CAC 40, the SBF 120 will see two groups enter its composition: the petroleum products distributor Esso and, therefore, Casino. This return will be effective at the close of Monday June 24. At the same time, semiconductor group X-Fab and digital support services specialist Solutions 30 will both leave the index.

If an entry on the CAC 40 very often crowns a superb stock market performance, this is much less the case for the SBF 120. In September 2023, Lectra, specialist in cutting systems for flexible materials (such as fabrics) for fashion , automobiles and furniture, joined it while its stock lost more than 20% over the whole year. Akka Technologies, for its part, entered in March 2020, when the consequences of the pandemic on its activity were already worrying the market. Like many groups entering the SBF 120, Akka did not last long, remaining only six months in the index. Moreover, X-Fab, for its part, lasted nine months.

In the case of Casino, since the start of the year, its stock has lost 95.5%.

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A heavy recapitalization

Obviously, Casino’s plunge can be explained by the mega-recapitalization and the heavy financial restructuring carried out to put the Saint-Etienne group back on its feet. To clean up finances strangled by a net debt of more than 6.2 billion euros, tens of billions of shares were issued, which led to massive dilution of previous shareholders. In March, once this financial restructuring was completed, Casino’s share capital consisted of more than 37 billion shares. The group was taken over by a consortium formed by businessmen Daniel Kretinsky and Marc Ladreit de Lacharrière and the British investment fund Attestor.

This heavy recapitalization came as a sanction for years of erratic strategic and financial management on the part of the previous management, namely Jean-Charles Naouri. As pointed out by the Ledouble firm, an independent expert mandated by the courts, the company went into debt to finance its international expansion and implemented a pricing strategy in France which led it to lose market share.

Despite its high debt, the group continued to allocate the majority of its results to the payment of the dividend, which was vital for the continued existence of its parent companies (which had taken on heavy debt to buy the group). The pandemic and inflation have reinforced these difficulties. Regulators and public authorities may also be questioned, while short seller Muddy Waters and then certain analysts had been warning for many years about the fragility of the group’s financial health.

Difficulties still present

The recapitalization of Casino has, in addition to its reduction of debt, had a virtue on the stock market: its market capitalization has been re-inflated. With debt converted into shares and capital injections, the distributor currently weighs 1.5 billion euros on the stock market, much more than before its financial restructuring.

It is probably this capitalization which could have encouraged the scientific council to reinstate Casino in the SBF 120, the council basing itself in particular on the floating market capitalization and the trading volumes on a security.

Now that its finances have been cleaned up, Casino intends to move forward. The new general director, Philippe Palazzi, declared on Tuesday during the general meeting that the company must regain “its place in French commerce”.

In a note published Thursday, the independent research firm Alphavalue, for its part, appears pessimistic. “Casino’s problems are far from over,” he judged. “It remains to be seen if the distributor can improve the competitiveness of its prices, while French consumers are increasingly attracted by ‘value for money’. The margin for error is slim,” developed the office of studies, reiterating his advice to “sell”.

Alphavalue fears that the group will still be forced to resort to dilutive financing to finance its operations and its objectives.