August 27, 2018 / 6:52 AM / 3 months ago

Metro soars on takeover speculation as stake sold

BERLIN (Reuters) - Shares in Metro AG jumped on Monday as Ceconomy announced it may join family-owned Haniel in selling a stake in the German retailer to an investor group led by Czech billionaire Daniel Kretinsky.

German retailer Metro AG sign is seen on the steps of their headquarters in Duesseldorf, Germany March 02, 2018. REUTERS/Thilo Schmuelgen

The news stoked speculation that Kretinsky - and Slovak investor Patrik Tkac, with whom he is buying a Metro stake from Haniel - might make a full bid for the company, shares of which have fallen by a third this year.

Ceconomy, the consumer electronics retailer that split off from Metro last year, said on Monday it was in talks to sell most of its 10 percent stake in Metro to investor group EP Investment, represented by Kretinsky.

Metro shares rose as much as 18 percent and were trading up 10.4 percent on Germany’s mid-cap index at 0934 GMT, on track for their biggest one-day gain ever. Ceconomy was up 4.4 percent.

If the Ceconomy sale takes place and the Czech and Slovak investors exercise a call option to buy the full Haniel stake, then EP would own 31.5 percent, above the 30 percent threshold that would require them under German law to bid for the whole company.

Bernstein analyst Bruno Monteyne said the share jump reflected the probability of a full-company bid at a premium as well as the likelihood of a major change in strategy that could boost the potential of the company.

EP Global Commerce, Kretinsky and Tkac’s investment vehicle, could not be reached for immediate comment.

Olaf Koch, Metro’s chief executive since 2012, has sought to focus the once sprawling conglomerate on its core cash-and-carry business in recent years, selling its Kaufhof department stores and then splitting from Ceconomy.

The strategy has failed to boost Metro’s share price, which tumbled in April when it cut its outlook due to poor performance at its Russian operations, forcing Ceconomy to take impairments on its stake.

Metro, which runs almost 300 stores in eastern Europe, said this month it hoped its shrinking business in Russia had turned a corner despite a quarterly drop in profit and sales.

However, shareholders, including the Haniel family, have expressed their dissatisfaction with Koch.

German monthly Manager Magazin last week reported they were looking for a replacement for Koch although his contract runs until March 2022.

Regarding its Metro stake, Ceconomy no decision had yet been taken on whether a sale would take place, and in any event it would retain a stake of around 1 percent for tax reasons.

Investment group Haniel said on Friday that it had agreed to sell a 7.3 percent stake in Metro to an investment vehicle of Kretinsky and Tkac for an undisclosed sum, plus a call option for Haniel’s remaining 15.2 percent stake.

Haniel is Metro’s largest shareholder with 22.5 percent, which was worth 977 million euros (£883.74 million) at Friday’s closing price. Ceconomy owns around 10 percent.

Kretinsky is the majority owner and CEO of power and infrastructure group EPH, which owns power plants in the Czech Republic, Slovakia, Italy, Britain and Germany. He also owns media, including the Czech Republic’s top-selling tabloid, Blesk.

After growing EPH into one of Europe’s biggest power groups, Kretinsky has branched out into other investments in recent years, buying some of Lagardere’s east European radio assets this year and holding talks with the French media group over buying some of its magazine titles, including “Elle”.

Additional reporting by Matthias Inverardi; editing by Louise Heavens and Jason Neely

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