Billionaire Said to Weigh Raising Metro Bid Facing Rejection

(Bloomberg) -- Czech billionaire Daniel Kretinsky is exploring raising his offer for German wholesaler Metro AG as the existing 5.8 billion-euro ($6.4 billion) bid faces a growing risk of rejection by shareholders, according to people familiar with the situation.

Representatives for Kretinsky are set to meet as soon as Monday with two key shareholders to discuss revising the offer, according to the people, who asked not to be identified because the proceedings are private.

Kretinsky and his Slovak partner Patrik Tkac are considering lifting their offer amid shareholder reluctance to sell at 16 euros a share, the people said. They may consider raising it to about 17 euros a share because Metro’s two key shareholders want as much as 18 euros while the bidders have so far been reluctant to pay much more than 16 euros, the people said. They also may have to put up more equity to dispel concerns that their bid is highly leveraged, the people said.

Depending on the negotiations and shareholder acceptance rates, the investor duo may decide not to table a new proposal. EP Global, the bidding vehicle for the Eastern European entrepreneurs, said in a statement in late July in response to Metro’s rejection that it’s convinced the offer is “very attractive” and the capital structure “very solid.”

EP Global said on Friday that rumors about a possible increase of their bid to 17 euros a share are “incorrect” and didn’t come from them, according to an emailed statement to Bloomberg News after the report. The firm also reconfirmed its intention to have a constructive dialogue with key shareholders.

The current bid of 16 euros a share -- 50 cents above Friday’s close -- undervalues the company, Metro has said.

Kretinsky and Tkac have secured about one-third of Metro’s shares in a tender offer that expires Wednesday. That’s a far cry from the 67.5% threshold for the transaction to succeed.

Kretinsky and Tkac pounced in June after building a stake last year, saying they saw an opportunity to turn around Metro as it sheds its retail operations and focuses on cash-and-carry outlets across Germany and eastern Europe.

European bricks-and-mortar merchants are struggling to contend with the rise of Amazon.com Inc. and discount chains Lidl and Aldi. If Kretinsky and Tkac succeed in their bid, they would join the likes of Mike Ashley, the billionaire U.K. entrepreneur whose Sports Direct International Plc took over House of Fraser, and Russia’s Mikhail Fridman, who’s moved to take control of Spanish grocer DIA.

A representative for Metro declined to comment.

The shares fell this week after the two key shareholders -- foundations representing investors whose families helped create Metro -- slightly increased their combined stake. On Monday evening, they said they won’t accept the offer and instead will pool their shareholdings to strengthen their position.

A statement by the foundations left the door open to alternatives beyond a simple sweetening of the current bid. The groups said they were “open to diverse and constructive solutions.”

Options could include retaining a portion of the current ownership stakes and agreeing to hand control to the bidders in exchange for an exclusive payment, one person said.

If the bid succeeds, Kretinsky plans not to pay dividends, according to the offer document.

To contact the reporters on this story: Eyk Henning in Frankfurt at ehenning1@bloomberg.net;Richard Weiss in Frankfurt at rweiss5@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net, Eric Pfanner

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