Metro has ‘no plan B’ even as demerger faces legal challenge
Chief of German retailer plays down threat to quash plans to split company
The head of Metro, Germany’s largest listed retailer, has “no plan B” if a billionaire shareholder is successful in a legal challenge to its plans to split the company in two.
In September Metro confirmed plans to spin off its food businesses into a new company, which would keep the name Metro, leaving a business built around its Media-Saturn electronics arm, to be renamed Ceconomy.
Metro said in March that four suits had been served in a German court against its plan. One of the suits was filed by Convergenta, the investment vehicle of billionaire Erich Kellerhals, who founded and still owns 21.6 per cent of Media-Saturn, and has clashed frequently with Metro’s management in recent years.
“I think the likelihood is almost negligible,” Olaf Koch, Metro’s chief executive, told the Financial Times. “You should never say never, but in this case I dare to say it.”
Last year, a mediator was appointed to help the two sides resolve their differences. Mr Koch said no negotiations were taking place, but Ralph Becker, managing director of Convergenta, said the two groups had held talks in March, and that he was hopeful of a further round soon.
Metro said there would be no more talks until the court in Düsseldorf had reached a decision on a so-called “clearance procedure”. This would allow the demerger to be registered long before a final decision had been reached on the merits of the complaints. A court date has been scheduled for late June.
In February shareholders approved the split at the annual meeting by an overwhelming majority of 99.95 per cent.
Convergenta’s aim was to resolve all its outstanding disputes with Metro, Mr Becker added, as well as the bigger question of Mr Kellerhals’ long-term involvement with Media-Saturn.
An attempt to reach a deal failed last summer, but there have been various attempts to revive it since. The deal discussed last year involved the Kellerhals family selling its stake in Media-Saturn to Metro in exchange for a cash consideration as well as the right to keep operating the business in two or three markets, and a similar structure was still an option, Mr Becker said.
The split marks the most ambitious move in Mr Koch’s efforts to turn Metro round since 2012. He has sold off businesses, including the Galeria Kaufhof network of department stores, exited markets, reduced debt and trialled new formats for its retail arm.
Mr Koch said he had done no contingency planning for a ruling in favour of the dissident shareholders because the likelihood of such an outcome was so small.
Although the shares have risen from €23.76 in April 2012 to €30.21 now, they are well down from their peak of €36.88 in 2013. Meanwhile, like-for-like sales in the most recent quarter barely rose, and Mr Koch acknowledged that Metro had moved too slowly to adapt to a fast-changing competitive environment.
“We are not making enough of an impact and we need to intensify our efforts on our core businesses,” he said.
But he said the split of the business would allow managers to focus better on strategic priorities, and that it did not mark the end of his restructuring efforts at the company.
“When we say ‘we’re done, we’re finished’, then the next scheme needs to come into play,” he said. “We’ll never be done.”
Mr Koch said the first priority, however, was to show that the demerger had made a difference and to maintain the new companies’ credit ratings.