Hy­per­mar­ket chain strug­gles with se­vere com­pe­ti­tion

The Gulf Today - Business - - FRONT PAGE -

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.

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