Newsmaker: Czech tycoon Kretinsky crashes close-knit French elite with Casino bet

Gencor Industries

05/10/2023 11:53

By Mathieu Rosemain and Jan Lopatka
       PARIS/PRAGUE, Oct 5 (Reuters) - In May, Czech
billionaire Daniel Kretinsky was invited to the annual "Choose
France" summit with top corporate executives.
    Just over two months later, the 48-year-old sent shockwaves
through the country's close-knit business elite by winning a
tight race for control of debt-laden supermarket group Casino.
    Kretinsky, who Forbes says has a net worth of $9.5 billion,
is a self-professed lover of France who learned to speak the
language by binge watching Francois Truffaut's The Last Metro.
    "He's decided to accelerate this development in France,
which is all the more interesting for him as he's a francophone
and a Francophile," said Denis Olivennes, Kretinsky's right-hand
man in France. "He's combining business with pleasure."
    On Thursday, Casino  CASP.PA  said that it had finalised a
binding lock-up agreement to restructure its debt with creditors
led by Kretinsky, to avert bankruptcy.
    Kretinsky, who made his fortune in the energy sector with a
string of high-stakes purchases and now owns a house near the
Elysee Palace in Paris, is also in talks to become the biggest
shareholder in French IT consulting firm Atos  ATOS.PA .
    His French shopping spree follows a string of investments in
Britain, where Kretinsky has made bets on supermarket Sainsbury
 SBRY.L , soccer club West Ham and the Royal Mail. 
    And last month, two people with knowledge of the matter told
Reuters that Germany's Thyssenkrupp  TKAG.DE  was in advanced
talks to sell up to 50% of its steel division to Kretinsky.
    But Kretinsky has also encountered obstacles along the way. 
    In 2019 he fell short of fully taking over German wholesaler
Metro  B4B.DE , although his bid made him its top investor with
nearly 46% of the shares, according to LSEG data. 
    He is also facing political headwinds in his quest to buy
Atos' legacy operations in France and failed to win the auction
for German utility Steag earlier this year, sources with
knowledge with the situation said. 

    POWER GRAB
    Kretinsky, who at the business dinner in May sat alongside
Brigitte Macron, wife of French President Emmanuel Macron, first
set foot in France as a teenager in the summer of 1990.
    Nine years later, as a freshly-graduated lawyer, he got his
first job at Czech-Slovak investment group J&T.
    From a starting salary of 800 euros a month, Kretinsky built
his fortune buying coal and power plants that European utilities
were selling to improve their green credentials. 
    His EPH business is Europe's largest privately held power
utility by production with 14.4 GW capacity in nine countries,
from coal to nuclear and gas to renewables.
    "He ended up making a lot of money on assets he bought on
the cheap," said a senior source close to French utility Engie. 
 
    The 2016 takeover of Vattenfall's German mines and 8,000
megawatt coal power plants is one example, where Kretinsky
received 1.7 billion euros ($1.8 billion) in cash to buy the
assets and the Swedish group booked a large loss on the deal.
    Kretinsky showed his negotiating skills in striking the
deal, one Czech energy market veteran said, by getting all
stakeholders on board, including the unions.
    Another market player, Czech investor Michal Snobr, said the
basic principle for Kretinsky was simple.
    "Buy it, immediately leverage it and it all grew fast amid
low interest rates," said Snobr, who specialises in energy
markets and worked with Kretinsky in the early 2000s at J&T.
    Kretinsky, who is known by his associates for working very
long hours when needed, had "great foresight, courage, and the
ability to go totally to the edge," he said.
    
    'VERY TOUGH'
    Other associates said Kretinsky immerses himself in the
operational details of businesses he invests in.
    "Sometimes he may know a target company better than its own
CFO," said Igor Mesensky, a partner in charge of transactions at
KPMG Czech Republic, who has advised Kretinsky.
    Companies under Kretinsky's control or joint control had
core operating profits (EBITDA) of more than 9 billion euros
last year and assets of more than 80 billion euros, an EPH
spokesperson said. EPH reported earnings before interest, tax,
depreciation and amortisation of 4.3 billion euros for 2022.
    Kretinsky's Prague-based holding firm employs around 250
people, with only a small plaque to signal its presence on the
appropriately-named boulevard-style Paris Street. It is run by a
loyal inner circle of managers, some with small equity stakes.
    Although Kretinsky's recent bets in France may prove tough,
the relatively small outlay may make it worth the risk.
    "We're talking about 1.2 billion for Casino... that's
nothing at all," the source close to Engie said, referring to
the equity investment put on the table by the Kretinsky camp.
    Some investment bankers say the same goes for Atos,
stressing that Kretinsky is particularly good at squeezing the
best terms in deals where he ends up as the only credible buyer.
    "He's very, very tough", said an investment banker who has
dealt with him. "His trademark is making deals in extremely
difficult conditions." 
($1 = 0.9512 euros)  

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FACTBOX-Czech billionaire Kretinsky's sprawling empire   
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BREAKINGVIEWS-France wins more than Kretinsky in Atos breakup   
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French retailer Casino finalises rescue deal led by Czech tycoon
    urn:newsml:reuters.com:*:nL8N3BB15K
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 (Reporting by Jan Lopatka and Jason Hovet in Prague, Mathieu
Rosemain in Paris; Additional reporting by Emma-Victoria Farr in
Frankfurt; Editing by Matt Scuffham and Alexander Smith)
 ((jan.lopatka@thomsonreuters.com; +420 234 721 614; Reuters
Messaging: jan.lopatka.thomsonreuters.com@reuters.net))