SIf the retailer Metro and the consortium around the real estate investor Redos had to agree to the sale of the subsidiary Real as planned by the summer, the weakening supermarket chain is threatened with a profound restructuring. The investor has presented a convincing concept, which among other things build on the continuation of the brand Real, said Metro CEO Olaf Koch on Thursday for the presentation of the semi-annual report. That does not mean that it can continue without necessary changes. On the contrary, as the current figures show, a significant adjustment of the business model, the cost structures and the branch network is required.
The retailer had agreed on Wednesday with Redos on exclusive negotiations for the sale of the long-standing problem child. The framework concept is to sell Real as a whole, in addition to the operating business, including the approximately 65 own-owned markets of the approximately 280-unit network of stores. The consortium is said to include Morgan Stanley Real Estate and the Hamburg-based project developer ECE, which also specializes in retail real estate.
Employee representatives fear busting
Koch does not want to say how many of Real's outlets end up out of business for economic reasons. The details of the realignment will be worked out by Redos in the coming weeks together with the Real-Management. There were no preliminary agreements on the transfer of individual branch portfolios to other trading companies, although many had already expressed their interest. The Redos management had stressed on Wednesday to place great emphasis on the takeover of employees in the case of location taxes.
Since Metro Real put it on the sales list last fall, the employee representatives fear a breakup of the chain, which has recently implemented around seven billion euros with around 34,000 employees. According to information in the journal "Lebensmittelzeitung" the food retailer Edeka should have contacts to the consortium and hope to take over ideally up to 100 locations. Kaufland has also expressed its interest in acquiring houses. Of course, Koch has repeatedly emphasized in the previous sales process that he does not want to get involved in antitrust risks.
If it concludes the contract, Metro will still be involved with a minority of 24.9 percent in the operating business of Real. This is done at the express request of the designated purchaser, said Koch. But then you have neither the blocking minority, nor the control. Since Metro can also give up this financial participation after three years, the economic risk for the group is clearly limited. He expects a cash inflow of around half a billion euros from the transaction.
Metro focuses on wholesale
Following the write-down of around 64 million euros on the enterprise value and 24 million euros on property, plant and equipment from Real in the 2017/18 balance sheet, the quarterly result now presented is again burdened by a non-cash impairment charge of 385 million euros. As a result, Metro posted a net loss of € 459 million in the second quarter (previous year: € 53 million). The high write-downs on Thursday were also the main reason why the Metro stock, which is listed in the M-Dax averages, fell by up to 6 percent to values of less than 14 euros.
In the future, Metro intends to concentrate exclusively on its wholesale business and, above all, to increase its catering business. Here Koch sees progress overall. In the second quarter, however, consolidated sales in continuing operations stagnated at € 6.8 billion. Because of the late date this year, the sales of the Easter business were missing in some countries. Like-for-like, the plus was 1.2 percent.
While wholesalers were facing declining sales, especially in the difficult Russian market and in Germany, Metro recorded growth rates in Asia and Eastern Europe. The discontinued operations of Real declined further, not least due to the postponement of the Easter business. Like-for-like sales fell by more than 5 percent. For the talks on possible partnerships in China, Koch believes he can say more in the summer. The business is a pearl, but for the lion's share retail and therefore not core competence of Metro. That is why we are looking for solutions with partners. The number of interested parties was pleasantly surprised, he said.
(tToTranslate) Olaf Koch (t) Metro (t) ISIN_DE0007257503 (t) F.A.Z. (t) Morgan Stanley Real Estate (t) ECE (t) Restructuring