Metro Gets Takeover Offer Valuing Retailer at $6.6 Billion

(Bloomberg) -- Two investors in Metro AG made a takeover offer valuing the German food distributor at 5.8 billion euros ($6.6 billion), saying they wanted to guide the company through its recovery.

Dusseldorf-based Metro received the bid from Czech billionaire Daniel Kretinsky’s EP Global Commerce VI GmbH and Slovak investment partner Patrik Tkac. Their bid valued the company at 16 euros per ordinary share and 13.80 euros per preferred share. The stock rose for a fourth day on Friday, closing at 16.07 euros, before the offer was disclosed.

“We are strongly convinced that Metro has all the prerequisites to be a long-term successful company,” Kretinsky said in a statement, adding that the buyers have several “necessary changes in the best interest of the company” in mind.

Changes Needed

Once one of the world’s biggest retailers, Metro has struggled since splitting off from its Ceconomy electronics arm two years ago, a move that was designed to boost the shares of both but backfired. The food business has lost market share to discount grocers including Aldi and Lidl, and it’s been dragged down by its exposure to Russia, where sanctions and a low oil price made business difficult. That’s led to substantial losses for Metro’s biggest shareholder, Franz Haniel & Cie., which had already reduced its stake and will now bow out.

Kretinsky, whose holdings include a football club and power utility EPH, already has a 10.9 percent stake in Metro, according to Bloomberg data. European billionaires are increasingly deploying billions of dollars on acquisitions. Sotheby’s agreed to be taken private earlier this month in a $2.7 billion deal with art collector Patrick Drahi’s BidFair USA.

The Metro bidders said the company needs to make changes to its organization, business and processes to keep competing in a changing landscape. Metro’s new owners will have to complete the sale of its struggling Real banner, one of the last retail operations it held, to transform it into a pure wholesale company.

Metro recommended that investors refrain from selling their shares for now, pending further review of the bid.

The supervisory board and management “will assess the offer in detail and will comment after submission of the offer documentation," the company said in a statement.

If the deal is approved, the buyers said they don’t plan to close any of the existing Metro stores in Germany or other core markets or substantially reduce headcount. They want to continue with previously announced plans to sell the Chinese unit.

Buyer Background

Kretinsky and Tkac are relative newcomers to the cutthroat world of German food retailing, which has become dominated by spartan operators like Aldi, Lidl and Netto. An entrepreneur, Kretinsky is better known for betting that coal will become a good investment because the rush to renewable energy will require more reliable back-up sources.

Metro’s bidders have also entered into an agreement with Haniel Finance Deutschland GmbH, which will accept an offer for its roughly 15% stake in Metro, according to the filing. A depressed valuation in August for the German retailer already prompted Kretinsky and Tkac to buy a stake from Haniel. Separately, Kretinsky’s holding company EP said it exercised a call option with an affiliate of Ceconomy AG that will transfer the electronic retailer’s Metro stake to EP.

Metro was founded in 1964 by German billionaire Otto Beisheim with the help of the Haniel and Schmidt-Ruthenbeck families. Beisheim introduced the Cash & Carry concept in Germany, and eventually exported it to the U.S. Metro also once owned Germany’s famed Kaufhof department store chain.

--With assistance from Richard Weiss and Eyk Henning.

To contact the reporters on this story: Matthew Boyle in New York at mboyle20@bloomberg.net;Anne Riley Moffat in New York at ariley17@bloomberg.net

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Mark Schoifet, Michael Hytha

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