By and  on March 8, 2007

PARIS — The king of luxury has arrived in the supermarket aisle.

LVMH Moët Hennessy Louis Vuitton chief Bernard Arnault said Wednesday that he has teamed up with Los Angeles-based private equity fund Colony Capital to take a joint 9.1 percent stake in Carrefour, the world's second-largest retailer after Wal-Mart.

Groupe Arnault, which is Arnault's private investment firm, and Colony said they purchased 64 million shares of Carrefour. The cost of the investment was not disclosed, but was estimated to be more than 3.5 billion euros, or $4.59 billion at current exchange, based on recent market values.

Arnault and Colony characterized the move as a "strategic, industrial and long-term investment" based on Carrefour's leading market position and its "strong growth potential." The investors said they would work with the Halley family, Carrefour's largest shareholder, and its current management.

But news of their investment coincided with turbulence within Carrefour's management ranks. Late Wednesday, the French retailer said its embattled chairman, Luc Vandevelde, has stepped down and will be replaced by Robert Halley.

"The supervisory board thanks Luc Vandevelde for his contribution and for his decision inspired by the interests of Carrefour, its shareholders and employees," the company said in a statement.

Carrefour also confirmed its confidence in the current president of the management board José Luis Duran, who has been in that role for two years.

Carrefour is slated to report its full-year earnings today, and investors no doubt will seek clarification of future strategy.

A spokesman for Arnault declined to comment on whether the business titan planned to increase his stake in Carrefour. However, it is understood Arnault and Colony want the retailer to pursue a more aggressive strategy and improve its share performance.

Speculation about a hostile play for Carrefour has been building since the beginning of the year. That's when the Halley family began clashing with Vandevelde after he bought almost 10 million euros, or $13.1 million, of Carrefour shares in the open market.

That purchase prompted the Halleys to ask Vandevelde, who runs Change Capital Partners, the owners of Jil Sander, to step down as chief of their Citra holding company, through which they control 13 percent of Carrefour.

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