The ongoing eighteen-month saga surrounding listed retail group METRO’s attempts to sell off its unloved hypermarket chain Real seems to have reached an end with the sale of 100% of Real to Luxembourg-based investment company SCP Group.
The deal comprises the 276 stores, the digital channels including the online store, 80 properties and the group’s affiliated companies.
SCP says it will restructure the real estate portfolio based on a sustainable concept for the future together with German-based food retail investment expert x+bricks Group. The SCP Group has a successful track record of stabilising and improving German retail property portfolios to generate attractive returns and enhance asset value for its investors.
It is planned to continue the operation of around 50 core Real stores for a period of two years either under the Real brand or an alternative banner but the overall plan is to dispose of the individual stores to other retailers and/or sub-divide the units into smaller areas for multiple-occupation.
But many see this as the first chapter in the asset strip of a once great German retail chain with a total break up to come in the second phase. It has already been announced that stores will be closed if neither continued operation nor re-use by alternative retailers appears feasible. SCP currently estimates the number of proposed closures at around 30.
The conditions of the deal were announced on 11th February 2020 and METRO AG expects to pocket net proceeds in the order of around €300 million, which is €200 million less than had been hoped only weeks ago, based on an implied trading value of around €1.0 billion. Reports confirm that even this deal involved significant concessions on the part of METRO boss Olaf Koch.
As stores are taken over by other retailers, it is hoped that the new brands will continue to employ the company’s 34,000 staff. But as the stores employ an average staff of over 100, any mass closures imply significant job cuts. The retail union ver.di has spoken of a “bitter day for Real employees”. Board member Stefanie Nutzenberger confronted METRO head on. “The METRO management under Olaf Koch appears perfectly happy to see the loss of over 10,000 jobs and the federal ministry for economic affairs has watched helplessly whilst thousands of people lose their jobs or working conditions in the retail sector are eroded away”.
However the deal isn’t over the line yet. The transaction is now with the European Commission for approval and still requires the final agreement of the Board of Directors of Moscow-based holding company Sistema PJSFC, a Russian group with wide-ranging interests including telecommunications, pharmaceuticals, forestry and healthcare producing an annual turnover of €11.2 billion (2018). The company is stock exchange-listed, but 59% of shares are held by multi-billionaire Wladimir Jewtuschenkow.
Koch still expects there may be problems under cartel law as x+Bricks is associated with Real competitor Kaufland, which belongs to one of Germany’s Big 4 food retailers. If the deal does get the green light from the EC, it is possible that the German cartel office may still be of the view that the takeover of parts of the portfolio by other retailers will give them a disproportionate market dominance at regional level.
