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France's biggest supermarket group, Carrefour has denied approaching rival Casino over a possible tie-up.

That is despite Casino saying that its board had unanimously decided to reject a Carrefour approach.

However, Carrefour is adamant that no such approach was ever made.

Carrefour alleged that "difficulties" faced by Casino and its controlling shareholder might have prompted the "misleading and groundless communications".

Like many supermarkets, Casino is struggling with rising competition, particularly from discounters, and its shares have plunged by almost a third this year.

Many investors are betting that its share price will fall even further, in a trade known as short-selling.

One such investor, called Muddy Waters, has criticised Casino and its parent company Rallye for having a "convoluted" structure and complicated financing arrangements.

Even if Carrefour had confirmed the Casino approach, any deal would have faced regulatory scrutiny as both firms are big players in the French retail market.

'No sense'

With a 20.4% share of the market, Carrefour is France's second biggest supermarket, just behind E. Leclerc which has a 21.1% share.

Casino is the fourth biggest with an 11.6% market share.

"The alleged approach makes no sense to me," said Bruno Monteyne, a retail analyst at the investment bank Bernstein.

"The anti-trust issues in both France and Brazil would be so big, that it would make a deal uneconomical. That makes me doubt that Carrefour attempted such a move."

To cut its debts Casino has been selling businesses and analysts say it is possible that Carrefour has approached Casino over those assets.

Casino owns profitable upmarket retailer Monoprix as well as online retailer Cdiscount, both of which, analysts say, would be attractive purchases.