A leading retail analyst has said that Germany's Metro AG finds itself in a "complicated" position over the sale of its Real business, "because the Real hypermarket assets are not a very attractive investment".
Earlier this week, Germany's Handelsblatt reported that Metro may be poised to sell Real to Markant for around €99 million, however Metro would inject around €300 million of fresh equity into the business ahead of the sale. In addition, the properties in the business would be sold to a different investor.
Elsewhere, Boersen-Zeitung said that a consortium led by Redos group, which also includes Morgan Stanley and ECE, has dropped out of the bidding for the business.
Retail property investor X+Bricks remains interested, however, according to reports.
Options On The Table
Commenting on the ongoing saga, Bruno Monteyne of Bernstein Research said, "What is clear from the options available to Metro is that (1) both are complicated and (2) no major boost to valuation should be expected. The reason behind this, we feel, is because the Real hypermarket assets are not a very attractive investment.
"Hence, any interested parties will want to protect themselves against the financial risk of store closures and redundancies and the potential anti-trust issues. This seems to be the reason that Redos group have taken a step back from the negotiating table."
This is also the reason, Monteyne suggests, that Metro is considering the 'plan B' of "putting €300m into Real, before selling it for €99m, and being stuck with the financial net debt in Real as well.
"The weak negotiating position seems due to the poor business they are trying to sell; for Metro, discontinued operations (mostly Real) were a cash drag of -€133m in FY18 and net profit was -€110m in FY18. What is the value of such a loss making business?"
Sales Plans
In February, Olaf Koch, Metro's chief executive, said that he was confident that Real would be sold 'as a whole', and would generate a positive price.
Metro is still confident that the sale of the Real business can be completed by May or June of this year, according to reports.
"We patiently wait for more news, however from current media reports, the options available to Metro do not look to provide much valuation upside for the shares," Monteyene added.
© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.
