The €5.8 billion ($6.6 billion) offer of Czech billionaire Daniel Kretinsky and his Slovak investment partner Patrik Tkac for Metro AG “substantially undervalues" the German food distributor, the management board said on Sunday.
The unsolicited bid of €16 for each ordinary share and €13.80 per preference share also doesn’t reflect its value creation plan, the Dusseldorf-based company said in a statement. Metro’s ordinary shares closed at €15.55 on Xetra on Friday, before the offer was disclosed. The preference shares closed at €13.
Metro’s management and supervisory board will make a comprehensive comment on the bid once the full offer document is available, according to the statement, in which the company also advised shareholders to take no action. Haniel Finance Deutschland GmbH, a 15% holder, already agreed to back the bid.
Once one of the world’s biggest retailers, Metro has struggled since splitting off from its Ceconomy electronics arm two years ago, a move that was designed to boost the shares of both but backfired.
Metro’s food business has lost market share to discount grocers including Aldi and Lidl, and it’s been dragged down by its exposure to Russia, where sanctions and a low oil price made business difficult. That’s led to substantial losses for Metro’s biggest shareholder, Haniel, which had already reduced its stake.
Kretinsky, whose holdings include a football club and power utility EPH, already has a 10.9% stake in Metro, according to Bloomberg data. European billionaires are increasingly deploying billions of dollars on acquisitions. Sotheby’s agreed to be taken private earlier this month in a $2.7 billion deal with art collector Patrick Drahi’s BidFair USA.
The Metro bidders said the company needs to make changes to its organization, business and processes to keep competing in a changing landscape. Metro’s new owners will have to complete the sale of its struggling Real banner, one of the last retail operations it held, to transform it into a pure wholesale company.
If the deal is approved, the buyers said they don’t plan to close any of the existing Metro stores in Germany or other core markets or substantially reduce headcount. They want to continue with previously announced plans to sell the Chinese unit.
Kretinsky and Tkac are relative newcomers to the cutthroat world of German food retailing, which has become dominated by spartan operators like Aldi, Lidl and Netto. An entrepreneur, Kretinsky is better known for betting that coal will become a good investment because the rush to renewable energy will require more reliable back-up sources.
