Metro puts struggling Real hypermarket chain on the block
* Metro CEO had previous contact with potential buyers
* Real has struggled with discounter competition, online
* Private equity seen as taking an interest
* Amazon seen as possible bidder after Whole Foods move
* Move to sell Real not linked to new investor in Metro -CEO
(Adds HSBC analyst upgrade)
By Emma Thomasson and Arno Schuetze
BERLIN, Sept 14 (Reuters) - German retailer Metro AG
plans to sell its struggling Real hypermarkets and is
confident of interest in the chain, though bankers played down
talk it might attract Amazon and a price tag of up to 1
billion euros ($1.2 billion).
Industry bankers contacted by Reuters said private equity
firms were the most likely bidders and that Metro might have to
effectively pay a buyer to take the chain off its hands.
Foreign players have shunned the cut-throat German grocery
market, which is dominated by discounters Aldi and Lidl, since
Walmart took a loss of $1 billion when it sold its
stores to Metro and pulled out of the country in 2006.
Metro says it wants to focus on its wholesale business which
serves independent traders, hotels and restaurants and is more
shielded from ecommerce, while doing more delivery to customers.
"The fact that we repeatedly had expressions of interest
shows that we can take up the journey again," Metro's chief
executive Olaf Koch told journalists on Friday.
Metro previously tried to sell Real in 2012 and a consortium
of Apollo and Towerbrook made an offer, as did KKR, before the
retailer opted instead to restructure the chain.
Koch expected the sales process to take up to eight months.
HSBC's European retail analyst, Andrew Porteous, welcomed
the plan and raised his price target for Metro shares to 14
euros from 11.50 euros.
"Increased focus is a positive," he said in a note. "We have
consistently held that Metro needed to simplify in order to
Large European retailers such as Ahold, Carrefour, Auchan,
Tesco are unlikely to bid for Real, people familiar with the
The chain may attract more interest from investors such as
Apollo-backed Alteri, owner of Babywalz and CBR Fashion Group or
from other private equity firms.
Buyout groups, have had mixed results though with retail in
Germany and several deals - such as Sun Capital's Neckermann
investment - have turned sour.
Some analysts speculated Amazon could be interested after
its acquisition of U.S. grocery chain Whole Foods last year.
Germany is its second biggest market after the United States.
"Germany's grocery ecommerce is very underdeveloped and
Germany is a very important country for Amazon," said Bernstein
analyst Bruno Monteyne, adding a price of around 1 billion euros
would be no hurdle for the ecommerce giant.
An Amazon spokesman declined to comment and the buyout
groups named either declined to comment or were not immediately
FINDING A BUYER
Real has suffered from tough competition from the advance of
online players like Amazon and has sought to build up an online
grocery business in recent years. Its ecommerce still only
accounts for 2 percent of its 7.2 billion euro sales.
The business posted a loss and saw sales slide 7.2 percent
in the latest quarter, which it blamed on an early Easter and
unusually hot weather.
Bankers do not view Real as high on Amazon's shopping list.
One said Real could be sold for "near zero at best", while
another said Metro may have to pay to offload the business.
Koch said selling Real was not connected to Daniel Kretinsky
buying a stake in Metro last month, although he said the company
had met the Czech billionaire, whose move prompted speculation
he could make a full bid and take Metro private.
Analysts said a financial investor might be interested in
the real estate value of the 65 hypermarkets that Real owns,
while other options could be a sale of parcels of stores to
chains like Lidl or dominant supermarket group Edeka.
However, peers need to tread carefully to avoid anti-trust
concerns like those that dogged Edeka's purchase of loss-making
chain Kaiser’s in 2015.
One of the bankers said fellow German supermarket chain
Kaufland, held by Lidl owner Schwarz Group, could show an
interest in some sites. Koch told journalists the aim was to
sell Real as a whole rather than as a bundle of stores.
Trade union Verdi criticised Metro's treatment of Real's
34,000 workers in recent years and said the company should be
sold as a whole.
"First the workforce forwent part of their wages ... then
the company shredded the collective bargaining agreement, and
now Real is going to be sold," said Stefanie Nutzenberger from
In focusing its business, Metro has already sold its Kaufhof
department stores and split from consumer electronics
retailer Ceconomy. Real's stores in eastern Europe
were sold to French retailer Auchan in 2012.
Metro's shares closed down 1.2 percent in Frankfurt at 13.51
($1 = 0.8540 euros)
(Additional reporting by Matthias Inverardi. Writing by
Caroline Copley. Editing by Mark Potter and Elaine Hardcastle)
First Published: 2018-09-14 09:17:23
Updated 2018-09-14 18:47:49
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