Metro AG (MEO), Germany’s biggest retailer, hired Deutsche Bank AG (DBK) to explore options for its consumer-electronics division, according to two people with direct knowledge of the matter.
Alternatives may include a sale, spinoff or initial public offering of the Media-Saturn unit, said the people, who asked not to be identified because the matter is private. The division, which includes the Media Markt and Saturn chains, could be valued at about 5 billion euros ($6.8 billion), one of the people said.
Metro made the appointment as it seeks to end a deadlock with Media-Saturn’s co-founder, Erich Kellerhals, over the influence he still wields, the people said.
Kellerhals, who owns a 22 percent stake in Media-Saturn, is working with Morgan Stanley (MS) to seek a solution, according to the people. It’s the first time that both sides have made a serious effort to agree on a way forward, they said.
Once Deutsche Bank and Morgan Stanley have completed their assessment, they are likely to brief Metro’s supervisory board on their conclusions and proposals, one of the people said.
Ruediger Stahlschmidt, a spokesman for Metro, declined to comment. A representative of Kellerhals’s investment firm, Convergenta Invest, didn’t immediately reply to a request for comment. A spokeswoman for Deutsche Bank declined to comment. A spokesman for Morgan Stanley declined to comment.
Possible Spinoff?
A spinoff of the unit is the most probable outcome, according to one of the people. The first meeting between Metro management and Kellerhals could happen in the next few weeks, one of the people said, adding that there is no guarantee that an agreement would be reached.
Shares of Metro fell 1.6 percent to 30.56 euros at 10:10 a.m. in Frankfurt. The shares have dropped 13 percent this year.
Chief Executive Officer Olaf Koch is trying to effect a turnaround at Dusseldorf-based Metro, which also operates the Galeria Kaufhof department stores. The CEO, in his post since the start of 2012, is trying to modernize Kaufhof, reposition Media-Saturn toward e-commerce and take its Russian Cash & Carry wholesale unit public amid adverse market conditions.
Sales at Media-Saturn stores open at least a year fell 3.7 percent in the quarter through March. Analysts surveyed by Bloomberg expect on average that Metro’s operating profit this year will decline 15 percent to 1.7 billion euros.
Kellerhals, who founded the Media-Saturn business in the late 1970s and sold it to a predecessor company of Metro in the late 1980s, has been agitating for change at the division amid competition from Amazon.com Inc. and others. The stores sell everything from TVs and coffee makers to large appliances.
In May, Kellerhals successfully pushed for the replacement of unit head Horst Norberg, who left May 6. His replacement, board member Pieter Haas, is seeking to boost online sales.
At a dinner with journalists in Dusseldorf July 9, Koch said he opposes an immediate spinoff of Media-Saturn.
Bloomberg News edited by ESM
