Retailer Casino says it rejected Carrefour approach, which Carrefour denies making

By Sudip Kar-Gupta

PARIS (Reuters) - French supermarket group Casino, whose shares have slumped this year due to concerns over its debt, said it had rejected a tie-up approach from domestic rival Carrefour, although Carrefour denied making any overtures.

France's supermarkets are looking for ways to bolster profits after a protracted price war at home, and are also under pressure to modernise their businesses to counter the likes of online giant Amazon.

Casino said it had been contacted by Carrefour in recent days over a possible tie-up, but noted regulatory hurdles to any such deal given the two companies' strong positions in the French grocery sector.

In a statement, Casino said its board of directors had met on Sunday and "unanimously decided to reject Carrefour's approach".

"The board unanimously reiterated its entire confidence in Casino's strategy for value creation based on its unique market positioning," Casino said.

It added: "The board of directors also acknowledged the barriers, in France and in Brazil, to a combination with Carrefour, especially in terms of competition and employment.

However, Carrefour - which like Casino also has a large business in Brazil - denied making an approach, saying in a statement it was surprised Casino's board of directors could consider "a merger proposal that does not exist."

"The difficulties faced by Casino and its controlling shareholder (do) not justify untimely, misleading and groundless communications," added Carrefour.

Casino and Carrefour shares fell as the stock market opened on Monday, but then recovered to trade slightly higher.

Carrefour is the world's second-largest retailer by revenues after Walmart Inc with a market value of about 13 billion euros ($15.3 billion). Casino has a market capitalisation of about 4 billion euros.

Ion-Marc Valahu, a fund manager at Geneva-based firm Clairinvest, said he did not think a tie-up was feasible.

"There would be too many regulatory issues, and the two companies have different cultures," said Valahu, whose firm owns some Casino shares.

Casino shares have slumped nearly 30 percent since the start of 2018 as investors fret over its debts and those of parent holding group Rallye.

Rallye, through which Chief Executive Jean-Charles Naouri controls Casino, needs to repay over 600 million euros worth of bonds in October and 300 million euros worth in March.

Last week, five banks granted Rallye a new 500 million euros credit line, while Casino has also been selling off assets in order to cut debts.

Carrefour shares are down nearly 10 percent so far this year. In January, Carrefour announced plans to cut costs and jobs, boost e-commerce investment and seek a partnership in China to lift profit and revenue.

Carrefour also struck a global purchasing alliance with Tesco in July.

($1 = 0.8516 euros)

(Reporting by Sudip Kar-Gupta; Editing by Richard Lough and Mark Potter)