Metro Says Kretinsky's $6.6 Billion Bid Undervalues Retailer

(Bloomberg) -- The 5.8 billion-euro ($6.6 billion) offer of Czech billionaire Daniel Kretinsky and his Slovak investment partner Patrik Tkac for Metro AG “substantially undervalues” the German food distributor, the management board said on Sunday.

The unsolicited bid of 16 euros for each ordinary share and 13.80 euros per preference share also doesn’t reflect its value creation plan, the Dusseldorf-based company said in a statement. Metro’s ordinary shares closed at 15.55 euros on Xetra on Friday, before the offer was disclosed, and are up about 16 percent this year. The preference shares closed at 13 euros.

Metro’s management and supervisory board will make a comprehensive comment on the bid once the full offer document is available, according to the statement, in which the company also advised shareholders to take no action. Haniel Finance Deutschland GmbH, a 15% holder, already agreed to back the bid.

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.

Kretinsky’s EP Global Commerce VI GmbH declined to comment on Metro’s statement.

Discount Grocers

Metro’s 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, Haniel, which had already reduced its stake.

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.

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 the German grocery business. 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.

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 Anne Riley Moffat.

To contact the reporters on this story: Alexander Kell in Frankfurt at akell@bloomberg.net;Matthew Boyle in New York at mboyle20@bloomberg.net

To contact the editors responsible for this story: Lukas Strobl at lstrobl@bloomberg.net, James Amott

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