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Five years ago, Jean-Charles Naouri had the opportunity to sell the casino of his French grocery empire before it collapsed under a mountain of debt.
US short seller Muddy Waters Research sounded the alarm about the indebted group’s opaque structures when Alexandre Bompard, chief executive of Casino’s biggest rival Carrefour, proposed a merger in September 2018. Bompard was ready to let Naouri become the combined group’s largest shareholder, according to people familiar with the meeting.
Naouri’s reaction was fiery. Casino announced this approach and said it rejected it. Carrefour had to explain that it had not submitted an official offer. People said the move blew up any chance of an agreement.
The incident was typical of Naouri, say people who have worked with him and describe him as a brilliant mind blinded by an increasingly paranoid state.
“As soon as the Muddy Waters attack happened, he lost all bearings and feeling,” said one of the people who worked with Naouri. “He is extremely talented and megalomaniacal . . . almost immediately closed the door on the Carrefour deal. He thought he could save the company himself.”
The casino’s market share has since eroded and its share price has fallen from around €33 to €3 apiece as the business hemorrhages cash to support operations. Now Naouri’s 51 percent stake is set to be wiped out as part of a bailout spearheaded by Czech billionaire Daniel Krytinsky.
The deal is expected to be completed by the end of the month, closing a chapter in a decades-long saga that has bewildered the French business establishment, which initially rallied around one.
“The real story is how the business world in Paris enabled him for so long,” said the person who worked with him. There was a great deal of respect for him in Paris business circles, so the banks did not do their job. If he isn’t so well protected and seen with reverence, it won’t last long.”
Naouri “had the right vision,” said Clement Genelot, an analyst at Brian Garnier. “He was among the first to believe in the advent of online retail . . . and we see that large hypermarket formats were doomed. But . . . he was already constrained in terms of investment capacity.”
Born in Algeria and raised by a single mother, Naouri entered France’s elite universities thanks to a talent for mathematics. There he rubbed shoulders with future leaders and industry leaders. He joined the administration under Socialist President François Mitterrand, where he masterminded reforms designed to liberalize French financial markets. His intellectual abilities impressed many.
“He is the smartest man I have ever met, really in another category,” said Louis Schweitzer, the former head of Renault, who first met Nauri in government.
After a stint at Rothschild, he took over struggling retailer Rallye in 1991, then Casino and Leader Price competitor a few years later. It led to debt-fueled expansion in Asia and Latin America.
Naouri used the “Breton reel”, a French financial technique adopted by other budding entrepreneurs including Vincent Bolloret: it allowed him to control the casino with minimal capital through a series of holding companies.
But its low-margin retail sector meant it was unable to reduce the group’s debt buildup, preferring instead to retain firepower for acquisitions, according to Genelot.
It took an American to break the French Omerta surrounding the fault lines in the Naouri empire. Short seller Carson Block, Muddy Waters, targeted a casino in December 2015, when his hedge fund first disclosed his intention to go short.
At first Naouri seemed to ignore the attack, selling the Asian operation and raising debt from banks and bond investors. But influence across his group would eventually prove his downfall.
“French banks were more willing” to extend and pretend “than we expected,” Block told the Financial Times this week.
Many in the Naouri camp see Block’s attack as the cause, rather than the result, of the casino’s financial woes. Without Muddy Waters, the casino wouldn’t be in this financial position, said a person with first-hand knowledge of Naouri’s thinking. Most people would agree that the assets are good. . . There was a chokehold after the short attacks that made refinancing difficult.”
By 2019, the four holding companies above Casino, which had more than €3.7 billion in debt and derivative liabilities, were forced to file for a French pre-bankruptcy process, known as “protection”.
Casino critics have complained of being harassed or monitored: Block revealed in 2017 that a French corporate intelligence operative had posed as a Wall Street Journal reporter in an effort to uncover more information about his strategy. Kepler Cheuvreux told clients in 2020 that Fabienne Caron, an analyst who wrote critical casino reports, had received “anonymous intimidation attempts.”
Karon, who has since left Kepler, declined to comment. Block said he believed Naouri was behind the effort. Naouri and Casino denied the allegations.
For Block, the businessman’s downfall was arrogance, which “manifested itself in a failure to manage risk. He embraced financial risk as if he believed himself impervious to it,” he says.
The current restructuring talks have taken a toll on Naouri, whose fortune, estimated by Forbes at $1.2 billion in 2015, has evaporated. The 74-year-old is “busy seven days a week doing everything to get the casino back to safety,” the person close to him said. “It’s really about how we bring the casino to the right outlet.” Once it’s all over, he may “take a year off, do some teaching, or start another job.”
“He was touched by everything,” said another person close to the talks. “It’s his life’s work.”
