German retailer Metro weighs selling majority of China unit
The wholesaler is said to be in the early stages of looking for new strategic partnerships for the Chinese business
German food wholesaler Metro is considering selling a majority of its business in China to a local bidder.
The company is willing to sell as much as 80 per cent of the Chinese business while retaining a significant minority if an attractive offer is made, sources familiar with the matter said, asking not to be identified as the deliberations are private.
The sale is expected to be completed in February or March, after the Lunar New Year holidays, they said.
The final stake amount will depend on the offers, and a deal may also include Metro’s real estate holdings in the country.
The company has finished a review for its Chinese operations, which started in June, and has decided to sell control to a domestic partner, they said.
Metro, which was once a huge retail conglomerate, is undergoing massive restructuring in recent years - sold its Kaufhof department stores in 2015 and then separated from electronics group Ceconomy in 2017. All these moves are intended to allow Metro to focus more on its central cash-and-carry's wholesale business. Metro is also working to offload most of the retail operations, which have been struggling to compete with discounters such as Aldi and Lidl.
“There is the obvious attraction of monetising an attractive asset. However, what is left of Metro when selling the interesting growth assets,” Sanford C. Bernstein analysts led by Bruno Monteyne wrote in a research note on Friday.
“Initial excitement about a bid premium will soon be replaced by worries about hollowing out the business.”
A spokesman for Metro said that the company is in early stages of looking for new strategic partnerships for the Chinese business and is approaching partners it believes will enhance its existing capabilities as a wholesaler.
Once a pool of “seriously interested partners” is identified, the company will start discussions about the scope of the agreements, though it won’t comment on specific names or a timeline, he said.
Metro’s Cash & Carry business in China spans 95 stores and reported revenue of $3.1 billion in the 2017-2018 financial year, according to its website. The company had chosen Citigroup and JPMorgan Chase to run the review of its Chinese business, people familiar with the matter said last year.
Metro’s chief executive Olaf Koch said in December that he expects to sell that business in the next four to six months.
Updated: February 1, 2019 02:52 PM