German retailer Metro splits in two divisions
Europe’s fourth-biggest retailer by sales after the likes of Carrefour and Tesco has already spent several years restructuring and selling non-core businesses such as its Kaufhof department stores, to focus on its Metro cash-and-carry business and Media-Saturn electronics chain.
Metro shares, which traded at a big discount to dedicated cash-and-carry businesses like Sysco and Booker in terms of price to prospective earnings, jumped 12 percent by 0958 GMT, scoring the day’s biggest gain among Germany’s mid-sized stocks .MDAXI.
“We see this as a positive move … There were limited synergies between the two businesses and a conglomerate discount which can now unwind,” Bernstein analyst Bruno Monteyne said.
The split could also help resolve a long-running battle over Metro’s management of Media-Saturn with its billionaire founder, Erich Kellerhals, who still owns a stake of close to 22 percent.
Metro said the two businesses had minimal operational overlap, and the split should help them concentrate on their own activities and create possibilities for acquisitions.
“It’s the logical next step in the transformation of the Metro group,” Chief Executive Olaf Koch told journalists.
The cash-and-carry business runs 750 stores in 21 countries, serving hotels, restaurants and independent traders. It will be spun off together with the struggling Real hypermarket chain, which Metro has tried and failed to sell in the past. Together, those units have sales of about 38 billion euros ($43 billion).
The new food and wholesale business will be more exposed than the combined group to Russia, making up more than a quarter of operating earnings, according to Bernstein’s Monteyne, compared with about 18 percent now.
The Russian cash-and-carry business, the country’s fourth-biggest retailer, was long Metro’s most profitable unit but it was forced to suspend plans to list the operation after the Ukraine crisis erupted.
The wholesale and food entity will be run by Koch after the demerger, while Media-Saturn, which makes sales of about 22 billion euros in 15 countries, will be run by its current chief executive Pieter Haas.
Kellerhals, who has often said he would like to buy back the chain, has tried to push out Haas, also a Metro board member, and has called on Metro to inject some proceeds from recent asset sales into Media-Saturn.
“This split makes it easier to find a common solution with Kellerhals, potentially giving him the chance to buy the rest of the now separate entity out,” said Bernstein’s Monteyne.
A spokesman for Kellerhals’ investment vehicle Convergenta said the split should not have any impact on its influence at Media-Saturn, adding it was following the plans closely.
The proposed split, under which shareholders will receive one share in each company for each existing share, needs to be approved by the management and supervisory boards.
Metro said its three anchor shareholders – Haniel, Schmidt-Ruthenbeck and Beisheim – had indicated they would support the process, which it aimed to complete by mid-2017.
http://www.reuters.com/article/us-metro-ag-split-idUSKCN0WW11M