METRO PLANS TO SELL REAL
Hypermarket chain struggles with severe competition
BERLIN: German retailer Metro 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). The hypermarket chain has been struggling with discounter and online competition.
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 create value.”
Large European retailers such as Ahold, Carrefour, Auchan, Tesco are unlikely to bid for Real, people familiar with the industry said.
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 available.
A supermarket of Metro in Duesseldorf, Germany.