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Metro’s Billionaire Bidder Repeats His Trick

Metro’s Billionaire Bidder Repeats His Trick

Billionaire Daniel Kretinsky made a blatant attempt to take control over German wholesaler Metro AG without paying investors a decent premium last year. Now the shares have almost halved in value, he’s at it again.

The hospitality sector accounted for 48% of Metro’s revenue in 2019, according to Bloomberg Intelligence. The pandemic has exacerbated its existing woes. Kretinsky succeeded in amassing an almost 30% stake after 2019’s 16-euros-a-share ($19-a-share) offer. Since then, he’s sat on the sidelines while a turnaround has failed to materialize for Chief Executive Officer Olaf Koch.

With hindsight, shareholders must wish they’d sold to Kretinsky last year. Now, with investment parter Patrik Tkac, he intends to offer 8.48 euros per share. That’s just 2% more than Friday’s closing price. What’s more, Koch is stepping down at the end of this year, paving the way for his successor to pursue a fresh strategy that might lead to a revival.  

Metro’s Billionaire Bidder Repeats His Trick

The group’s two founding shareholders, the Meridian Foundation and the Otto Beisheim Foundation, which control 23%, are unlikely to be tempted. But Kretinsky probably only wants just a handful of shareholders to sell. If that happens, the stake held by his EP Global Commerce GmbH vehicle would jump over 30% and, under German takeover law, he will then be able to buy more shares in the market without being forced to launch a fresh bid.

Indeed, EP Global doesn’t appear to be aiming for 100% — it says it does not expect to hold more than 50%. This is what is known as “creeping control”. Bulking up could give Kretinsky more influence over the CEO recruitment process, and his or her strategy. The risk to Metro shareholders is that he gradually gains ownership of the company, without paying them a premium. The market is pushing back: Metro stock rose above the offer price on Monday.

But shareholders will find it easier to snub this offer on the grounds it is opportunistic, rather than for any positive reason. Koch carried out a significant restructuring, selling department store chain Galeria Kaufhof, demerging electricals arm Ceconomy AG and most recently raising around 1.9 billion euros in cash from the sale of the Real hypermarket chain and control of its Chinese arm. Metro has not shrunk to greatness. Signs of recovery over recent months as restaurants and hotels reopened are encouraging, but a second wave of the virus is a significant risk.

A rival offer could yet materialize. U.S. food distributor Sysco Corp. made an approach earlier this year. All the same, Metro can’t just magic up a knock-out friendly bid. Its best option is to give new management a go at building on the turnaround whose foundations may now have been laid. 

If the new CEO finally manages to revitalize Metro, or Kretinsky’s move flushes out another bid, then the value of his existing holding will rise. If the wholesaler continues to drift, he can to pick up more shares. Disillusioned investors may be itching to throw in the towel — but they’d be helping Kretinsky gain increasing influence on very sweet terms.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.

©2020 Bloomberg L.P.