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German retailer Metro to demerger into two wholesale and retail groups

German retailer Metro AG is planning to split the group into two independent companies – a wholesale and food specialist group, and a consumer electronics products and services group – it said on Wednesday.

The wholesale and food specialist group will have Metro, Makro and their associated entities as well as Real while the consumer electronics products and services group will comprise Media-Saturn and its portfolio of strong formats and brands. The two businesses currently have “very limited operational overlap and very limited synergies”, according to Metro.

Both entities would become individually stock-listed, with their own distinct profile, Management and Supervisory Boards. After the separation, each company will have full control over its corporate strategies and be able to define its own expansion strategies in order to independently pursue acquisition and partnership strategies.

“This will further increase customer focus, accelerate growth of the businesses, simplify structures and improve time-to-market and operational excellence,” the German retail giant said in a press release.

Management and Supervisory Boards will make a decision on the contemplated demerger after a period of intensive consultation and review.

Olaf Koch, currently CEO of Metro AG, will be in charge of the wholesale and food specialist group while Media-Saturn’s CEO Pieter Haas will head the consumer electronics products and services group. Other board positions haven’t been decided.

The proposal of a demerger has gained favour from Metro AG’s anchor shareholders Haniel, Schmidt-Ruthenbeck and Beisheim.

The retailer aims to carry out the demerger by mid-2017 when Metro Cash and Carry, Real and other related businesses and services companies will be spun off from current Metro AG so that the rest business will fully focus on the consumer electronics sector under a new company name.

“This would enable both companies to strengthen their focus on the initiated transformation and innovation programs, while pursuing corporate development into significantly broadened spheres. It would also make the distribution and utilization of investment capital in both of the new entities clearer,” noted Metro.

It is envisaged that Metro AG shareholders would receive shares in both companies in proportion with their existing holdings. Following final decisions by the Management Board and the Supervisory Board, shareholders would be invited to a General Meeting in order to discuss and vote on the proposed demerger.

The German retailer believes it’s ready for the change as both of Metro Cash & Carry and Media-Saturn now have strong financial profiles and significant growth as well as value potential.

Metro Cash & Carry has delivered ten consecutive quarters of like-for-like growth and improving earnings, despite a challenging environment. Media-Saturn has achieved six consecutive quarters of like-for-like growth, an all-time high market share and strong earnings in the last fiscal year.

“With the sale of Galeria Kaufhof in 2015 and various other changes in the portfolio such as the sale Metro Cash & Carry Vietnam and Real International over the past years, focus on Metro AG’s core businesses has been enhanced, and the group’s balance sheet strengthened, preparing the grounds for such a change,” it added.