Metro to sell majority stake in Chinese business to Wumart

HONG KONG/DUESSELDORF, Germany (Reuters) - German wholesaler Metro B4B.DE has agreed to sell a majority stake in its Chinese operations to local retailer Wumart, continuing a drive to simplify its business and focus on its core customers in the hospitality industry.

FILE PHOTO: German retailer Metro AG sign is seen on the steps of their headquarters in Duesseldorf, Germany March 02, 2018. REUTERS/Thilo Schmuelgen/File Photo

Metro said on Friday the deal, which confirms an earlier Reuters story, gave the Chinese unit an enterprise value of 1.9 billion euros ($2.1 billion) and that the German group would retain a 20% stake in a joint venture called Metro Wumart China.

Metro expects to receive proceeds of 1 billion euros from the stake sale, which Chief Executive Olaf Koch said could be used to fund acquisitions, without elaborating.

Once a sprawling retail conglomerate, Metro has in recent years been restructuring to focus on its European cash and carry business supplying hotels, restaurants and cafes.

It has sold off Kaufhof department stores, split from consumer electronics group Ceconomy CECG.DE and is in talks to sell its loss-making REAL hypermarkets.

Koch said Metro had an option to sell its 20% stake in the new Chinese joint venture in two years.

Metro’s Chinese operations include 97 stores and real estate assets in major cities such as Beijing and Shanghai.

The business made earnings before interest, tax, depreciation and amortisation of 153 million euros in fiscal 2017-18.

But wholesalers and retailers alike in China are facing intense competition from online operators.

Metro said its involvement in the joint venture would allow it to explore various strategic partnership opportunities with Wumart’s parent Wumei and its technology partner Dmall, “particularly in terms of international sourcing of goods.”

Koch said on a conference call he was also confident that Metro would sell its REAL business.

Earlier on Friday, Reuters reported that Wumart Stores had emerged as the frontrunner to buy a majority stake in Metro’s Chinese business, citing sources familiar with the auction.

Metro said the deal was subject to regulatory approvals and was expected to close by the second quarter of next year.

Reporting by Matthias Inverardi in Duesseldorf, Julie Zhu in Hong Kong and Arno Schuetze in Frankfurt; Writing by Edward Taylor; Editing by Michelle Martin and Mark Potter