UPDATE 2-Metro sells Vietnam cash-and-carry unit for 655 mln euros

Thu Aug 7, 2014 11:30am EDT

* Metro to use proceeds for growth, cutting debt

* Boost to EBIT by 400 mln euros seen in 2014/15

* Metro first entered Vietnam in 2002, now has 19 stores

* Shares down 0.5 pct, hit lowest in over 12 months (Rewrites first paragraph, adds deal will boost EBIT by 400 mln euros)

By Emma Thomasson and Arno Schuetze

BERLIN/FRANKFURT, Aug 7 (Reuters) - Metro AG has agreed to sell its cash-and-carry unit in Vietnam to Thailand's Berli Jucker for 655 million euros ($876 million), generating funds to invest in the growth of the group and strengthen its balance sheet.

Metro, which runs Europe's largest consumer electronics chain Media-Saturn as well as Real hypermarkets and Kaufhof department stores in Germany, has been trying to streamline the business to focus on cash-and-carry and consumer electronics.

People familiar with the Vietnam transaction said Metro had not actively sought a buyer but was approached separately by Berli Jucker and by convenience store chain CP All, which last year bought cash-and-carry wholesaler Siam Makro.

"We strongly believe that the proposed transaction will create long-term shareholder value for both parties," Metro Chief Executive Olaf Koch said on Thursday.

According to two people familiar with matter, the deal which is subject to approvals from relevant authorities will boost Metro's earnings before interest and taxation (EBIT) in the 2014/15 fiscal year by about 400 million euros.

Some of the money is likely be used for investments in countries such as India and China, where Metro plans to expand, they added.

Europe's fourth-biggest retailer opened its first cash-and-carry store in Vietnam in 2002 and now operates 19 stores across the country with 3,600 employees, generating sales of 516 million euros in the 2012/13 fiscal year.

CURRENCY EFFECT

The Ukraine crisis forced Metro to delay a stock market listing of a stake in its Russian cash-and-carry operation earlier this year. It had hoped that a flotation would help pay for investment in the fast-growing Russian business and other emerging markets and pay down debt.

Shares in the company, which dropped sharply after Metro's third-quarter results last Thursday, fell 0.5 percent by 1507 GMT. That was in line with a drop in the STOXX Europe 600 retail index but Metro shares touched their lowest in more than 12 months.

Metro shares were hit last week after the company slipped to an unexpected loss due to costs of closing stores and overhauling Media-Saturn and warned of the effect of currency moves.

The stock has also been impacted by the company's exposure to Russia and the decision to delay a stock market listing of a stake in its Russian cash-and-carry unit.

Metro's cash-and-carry business, which sells wholesale to customers such as hotels, restaurants and independent retailers, accounts for about half of group sales, with over 750 stores in 28 countries in Europe and Asia.

Berli Jucker said in a statement it would benefit from access to supply chain infrastructure and material cost savings.

HSBC advised Metro on the deal while Lazard acted as advisor to Berli Jucker.

CP All was not immediately available for comment.

(1 US dollar = 0.7476 euro) (Editing by David Holmes)