Sysco Approaches Germany’s Metro About Takeover

(Bloomberg) -- Sysco Corp. has approached German wholesaler Metro AG about a potential takeover, as the U.S. food distribution giant explores ways to expand in Europe, people with knowledge of the matter said.

Sysco has made fresh overtures to Metro in recent weeks, after first expressing interest in buying a stake last year, said the people, who asked not to be identified because talks are private. The companies are working with advisers, though discussions are at an early stage and may not lead to a transaction, the people said.

Shares of Metro jumped as much as 23% in Tuesday trading, an intraday record. They closed up 19% in Frankfurt, giving the company a market value of about 4.5 billion euros ($5 billion). They lost 1% at 12.32 p.m. on Wednesday.

Any transaction would be Sysco’s biggest ever and mark the first major move by Chief Executive Officer Kevin Hourican, a former top manager at CVS Health Corp., since he took the reins of the $35 billion company earlier this year. Metro would offer Sysco access to hotel, restaurant and catering clients throughout the continent.

Wholesale Focus

Sysco, the largest North American food-service distributor, has been looking to Europe for growth after a blocked attempt to buy domestic competitor US Foods Inc. in 2015. The next year, the company acquired London-based food-service distributor Brakes Group in a $3.1 billion deal to expand in Europe.

Representatives for Metro and Sysco declined to comment.

Metro would be “a perfect match from a regional perspective,” for Sysco, Baader Helvea analyst Volker Bosse wrote in a note to clients, adding the suitor “could create a lot of cost synergies by downsizing Metro’s headquarters functions.”

Metro has focused on its wholesale operations after separating from its consumer electronics arm in 2017. It also agreed last month to divest its hypermarket chain, Real. The German company reached a separate deal last year to sell control of its Chinese business to the owner of local rival Wumart Stores Inc. Those two transactions are set to bring in more than 1.5 billion euros ($1.7 billion) of net proceeds, according to a filing.

Czech billionaire Daniel Kretinsky in recent months has increased his stake in Metro to just below 30%. Crossing that threshold would require him to launch an offer for the rest of the company. Any suitor would need to win him over to gain full control.

A representative for Kretinsky declined to comment.

Failed Bid

Kretinsky and his Slovak partner Patrik Tkac failed in their own attempt to buy out Metro last year, after their 5.8 billion-euro bid didn’t get support from enough investors. Metro’s management at the time opposed the deal, arguing it was highly leveraged and would restrict the company’s strategic leeway.

While one of Metro’s three founding families sold its stake to Kretinsky, the Meridian Foundation and Beisheim Group pooled their shares and said in January they had a de-facto blocking stake, with 23% of the company.

A spokeswoman for the pool said it had not been contacted by Sysco, but would look at a potential offer and consider it, depending on the price.

Kretinsky last year said he would make his next moves dependent on Metro’s progress in selling its China unit and the hypermarket chain.

While their long-term intentions are unclear, Kretinsky and Tkac have said they see value in Metro, which runs warehouse-style cash-and-carry outlets across Germany and much of eastern Europe. Kretinsky has built a portfolio that includes energy and media assets as well as the Sparta Prague soccer team. He has also invested in French grocer Casino Guichard-Perrachon SA.

--With assistance from Deena Shanker and Ed Hammond.

To contact the reporters on this story: Eyk Henning in Frankfurt at ehenning1@bloomberg.net;Aaron Kirchfeld in London at akirchfeld@bloomberg.net;Richard Weiss in Frankfurt at rweiss5@bloomberg.net;Nabila Ahmed in New York at nahmed54@bloomberg.net

To contact the editors responsible for this story: Daniel Hauck at dhauck1@bloomberg.net, ;Kenneth Wong at kwong11@bloomberg.net, ;Daniel Schaefer at dschaefer36@bloomberg.net, Eric Pfanner, Ben Scent

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