If Metro does sell its business in China in the future, then the receiver needs to consider its overall valuation and future development.
After Ali or the purchase of Metros business in China, there have been market rumors that Wumart and Yonghui Supermarket participated in the last round of bidding for Metros business in China, while Suning Holdings Group has abandoned the bidding. In addition, Yonghui has joined Gaolu Capital and Tencent is also discussing joining the consortium. The finalists may be asked to issue binding proposals in August, with the deal valued at around $2 billion in view of intense competition from potential buyers.
This is not the first time that Metro is going to sell its business in China. It has been reported that Ali is negotiating with Metro to buy a part of the Chinese business of the German retailer. The negotiations are still in the early stages and there is considerable uncertainty in the future. More sources said that before the acquisition of Darun Fat, Ali had talks with Metro, but after Ali acquisition of Darun Fat, the negotiations between Metro and Ali were temporarily ended. At that time, Ali said to the first financial journalist, No comment on market rumors.
Since then, there has been a pause over whether Metros Chinese business is for sale. Nowadays, in the face of rumors of Wumart and Yonghui or bidding for Metros Chinese business, Metro responded to First Financial Journalist on July 10 by saying, No comment, no more information can be released at present.
In November 2018, Olaf Koch, the global chairman and CEO of Metro Group, gave an exclusive interview with the First Financial Journalist and made it clear that he would not sell Metros business in China, but would also step up his efforts to become a better food supplier in China. At the same time, Metro also actively participated in the Expo, hoping to expand import business in the Chinese market in the future, and add digital new retail.
At that time, before the first financial journalist asked the sensitive question of whether you would sell the business in China, Olaf Koch said on his own initiative: I believe everyone is very concerned about whether we will sell the business in China. Now I want to clarify that we will not sell Metros business in China. China is a market with great potential for development. We also know that Chinese consumers have very high requirements for food safety. Therefore, we regard food safety as our responsibility. At present, Chinas catering industry is developing very fast. Our responsibility is to help them as business partners, business supporters and business developers. Therefore, we have a very ambitious development plan in China. To achieve this plan, we will seek some partners.
Interestingly, the major retail giants have threads of cooperation with e-commerce, which adds to the speculation of cooperation. For example, Metro and Ali reached cooperation in 2015, Metro and Ali in commodities and other aspects of cooperation, become one of Alis important strategic partners. As an international retail giant, Carrefour has completed capital binding with Jingdong, a local e-commerce company. Subsequently, Wal-Marts physical stores in the Chinese market access Jingdong Groups investment Jingdong to Home to integrate online and offline. Yonghui and Tencent have previously invested in Carrefours China business.
Whether Metro eventually sells its business in China or not, its performance pressure is not small. Publicly available data show that the growth rate of Metros revenue has been narrowing for more than 20 years. In 2008, Metros revenue reached a record high of 67.955 billion euros. After that, it declined almost year by year. Its revenue in 2015 was 59.219 billion euros, and in 2016 it dropped 63% to 21.87 billion euros.
Performance pressure may be one of the main reasons why many retailers choose to close their stores or sell their shares. For example, in the near future. Suning Easy Buy (002024.SZ) announced that Suning International, a wholly-owned subsidiary of the company, intends to invest 4.8 billion yuan in the acquisition of 80% of Carrefour China. After the completion of the transaction, Suning Ebao will become the controlling shareholder of Carrefour China, and Carrefour Groups share-holding ratio will be reduced to 20%.
In recent years, with the high cost and fierce competition in e-commerce, there has been tremendous pressure on real retailers to make profits. Therefore, we have seen many retail enterprises go through the closing tide and Carrefour has also seen such cases as the sale of Chinas business holding rights to Suning, which are in line with the business logic of choice. If Metro does sell its business in China, its understandable, depending on who takes over and how it integrates. Senior retail analyst Shen Jun pointed out.
First Financial Journalist interviews learned that, unlike Wal-Mart, Carrefour and other competitors, which mainly rent stores, Metro has a large number of self-owned properties in the Chinese market, that is, its real estate strength is relatively strong, so even if its operating performance pressure is high, but if the property is included, its valuation is not expensive. If Metro does sell its business in China in the future, then the receiver needs to consider its overall valuation and future development.
Source: First Financial Responsibility Editor: Yao Liwei_NT6056