URL https://www.reuters.com/article/us-metro-hypermarkets/metros-real-hypermarket-sale-triggers-talk-of-amazon-interest-idUSKCN1LU0KP

DATE/ AUTHOR 2018-09-14 16:50:19+00:00	AUTHORS: Emma Thomasson, Min Read

H Metro puts struggling Real hypermarket chain on the block

S1 BERLIN (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).

S2 FILE PHOTO: German retailer Metro AG sign is seen on the headquarters in Duesseldorf, Germany March 02, 2018.
S3 REUTERS/Thilo Schmuelgen/File Photo

S4 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.

S5 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.

S6 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.

S7 “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.

S8 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.

S9 Koch expected the sales process to take up to eight months.

S10 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.

S11 “Increased focus is a positive,” he said in a note.
S12 “We have consistently held that Metro needed to simplify in order to create value.”

S13 Large European retailers such as Ahold, Carrefour, Auchan, Tesco are unlikely to bid for Real, people familiar with the industry said.

S14 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.

S15 Buyout groups, have had mixed results though with retail in Germany and several deals - such as Sun Capital’s Neckermann investment - have turned sour.

S16 Some analysts speculated Amazon could be interested after its acquisition of U.S. grocery chain Whole Foods last year.
S17 Germany is its second biggest market after the United States.

S18 “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.

S19 An Amazon spokesman declined to comment and the buyout groups named either declined to comment or were not immediately available.

S20 FINDING A BUYER

S21 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.
S22 Its ecommerce still only accounts for 2 percent of its 7.2 billion euro sales.

S23 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.

S24 Bankers do not view Real as high on Amazon’s shopping list.
S25 One said Real could be sold for “near zero at best”, while another said Metro may have to pay to offload the business.

S26 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.

S27 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.

S28 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.

S29 One of the bankers said fellow German supermarket chain Kaufland, held by Lidl owner Schwarz Group, could show an interest in some sites.
S30 Koch told journalists the aim was to sell Real as a whole rather than as a bundle of stores.

S31 Trade union Verdi criticized Metro’s treatment of Real’s 34,000 workers in recent years and said the company should be sold as a whole.

S32 FILE PHOTO: German retailer Metro AG supermarket in Duesseldorf, Germany March 02, 2018.
S33 REUTERS/Thilo Schmuelgen/File Photo

S34 “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 Verdi.

S35 In focusing its business, Metro has already sold its Kaufhof department stores and split from consumer electronics retailer Ceconomy.
S36 Real’s stores in eastern Europe were sold to French retailer Auchan in 2012.

S37 Metro’s shares closed down 1.2 percent in Frankfurt at 13.51 euros.

