EP Global's Takeover Bid 'Substantially Undervalues' Metro AG, Wholesaler Says

By Steve Wynne-Jones
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EP Global's Takeover Bid 'Substantially Undervalues' Metro AG, Wholesaler Says

Wholesaler Metro AG has said that an unsolicited voluntary takeover offer for the business by EP Global Commerce (EPGC) 'substantially undervalues' the firm, with respect to its earnings and value potential.

EPGC, which is led by shareholder Daniel Křetínský, made the offer to acquire the business on 10 July, at an offer price of €16.00 per Metro ordinary share and €13.80 per Metro preference share.

Growth Potential

In a statement, Metro said that the offer price does not reflect the 'fundamental value of Metro based on its potential for growth and profitability', and urged shareholders not to accept the offer.

“We are convinced that our strategy creates sustainable and profitable growth for Metro's future," commented Olaf Koch, Metro's chairman and chief executive. "Since 2012, we have been taking decisive action to transform our company and focus it entirely on wholesale. In a changing market environment, Metro is well positioned to play a leading role in the HoReCa and Trader sector."

Koch pointed to the group's reporting like-for-like sales growth of 2.3% in the first nine months of the year as evidence of the business' continued strong performance, and "increased relevance for our customers".


He added that the Metro management board and supervisory board believe that "Metro is already capable to respond to the dynamically changing market environment. We consider the price offered by EPGC to be inadequate as it substantially undervalues Metro and, even after reviewing its further conditions, recommend our shareholders not to accept the offer.”

Wholesale Performance

The statement also highlighted that profits in Metro's wholesale division have been growing for six consecutive years, while debt has been reduced from €5 billion to €2.7 billion, which gives 'financial leeway and flexibility for future growth initiatives'.

The company noted that EPGC is also a supporter of some of the initiatives already underway at Metro, such as the sale of the Real hypermarket business and the search for a strategic partner for Metro's China operations.

Analyst View

Commenting on Metro's statement, Bruno Monteyne of Bernstein Research said that he believed the door was still open on the proposed takeover bid.


"Management clearly stresses their intention to have written the response in a friendly tone. They know EP Global is now their biggest shareholder under any scenario," he said in a statement.

'"As per our previous analysis, we don't agree with management's views on those issues, except on additional leverage constraining the company," Monteyne added. "A short term review of Metro's performance will remind shareholders of the profit warnings last year in all segments: C&C, Real and Real estate. A longer term review shows that the total shareholder return in the last 10 years since the start of Olaf Koch as CFO (now CEO) in September 2009 has been -2.6% and been +20.6% since his start in January 2012. Whilst the company has started growing, profit growth has been elusive."

Metro published its third quarter results yesterday, in which it said that like-for-like sales were up 3.4% in the period, with sales up by 3.6% in local currency.

Reported sales increased by 2.8% to €7.6 billion in the quarter.

© 2019 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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