Retailer Metro's Media-Saturn China venture loses an investor
DUESSELDORF, Germany |
DUESSELDORF, Germany Nov 28 (Reuters) - A German billionaire is pulling out of a venture with Metro AG to open electronics stores in China, adding further uncertainty to a project which Metro has already placed under review.
Metro, which also runs cash and carries, hypermarkets and department stores, had planned to expand the Media-Saturn chain in China, but is reviewing its plans with a decision due by the end of the year.
Convergenta, the investment vehicle of billionaire Erich Kellerhals who founded the Media Markt chain which is now part of Media-Saturn, said it would exit the company set up for expansion in China when the venture's two-year test phase ends on Dec. 31.
The group cited the retailer's lack of readiness to invest in the hard-fought market.
"In China, you can only make a mark when you expand fast and aggressively," said Kellerhals, who owns 21.62 percent of Media-Saturn's China venture.
Metro had initially said it saw potential for over 100 stores selling electricals in China. But cut-throat price competition, especially from online players, has made life tough for a range of foreign retailers, from Tesco Plc to Home Depot Inc.
The German company has just seven stores in the world's second-biggest economy and Chief Executive Olaf Koch said last month that the market had turned out very differently than originally anticipated.
The Media-Saturn stores in China had sales of 100 million euros ($129.3 million) in the first nine months of 2012 but are heading for a loss of over 40 million this year.
Convergenta also said on Wednesday that Metro had rejected a suggestion by Kellerhals to acquire a rival with hundreds of stores.
Kellerhals owns a blocking minority of 21 percent of Media-Saturn and regularly speaks out against Metro's management of the unit.
A spokesman for Metro said the group believed Kellerhals had not engaged constructively in the China expansion, adding that the rival company he mentioned had not been for sale.
"We will now discuss future plans in China with the Media-Saturn management," he added.
Shares in Metro were down 3.5 percent by early afternoon on Wednesday, also burdened by news that major shareholder Haniel plans to sell a 4.24 percent stake in the company within 18 months to cut debt.
Metro is also battling with weak consumer sentiment in Europe that prompted a profit warning in October.
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