German retail giant Metro to split businesses into two listed entities

German retail giant Metro said last week it will spin off its businesses into two separately listed units, sending its shares sharply higher.

“The management board of Metro is preparing the creation of two independent and sector-focused companies through a demerger of the group,” Metro said in a statement.

Metro shares were the strongest performer on the mid-cap MDAX index of the Frankfurt stock exchange on Wednesday, shooting up 7.73 per cent to €26.47 in a generally firmer market.

A wholesale and food specialist group would be created comprising the group’s Metro, Makro and Real brands, as well as a consumer electronics products and services group centred around its Media and Saturn retail chains.

Since there is little operational overlap between the two businesses and limited synergy effects, management felt “very strongly that a split into two independent and focused businesses would be in the best interest of all stakeholders, as it would facilitate a significant opportunity for faster and more profitable growth,” said supervisory board chief Juergen Steinemann.

“Both entities would become individually stock-listed, with their own distinct profile, management and supervisory boards,” Metro said.

The aim would be to give each of the companies and their respective management full control over their corporate strategies.

“This will further increase customer focus, accelerate growth of the businesses, simplify structures and improve time-to-market and operational excellence,” it argued.

Moreover, both entities would be able to independently pursue acquisition and partnership strategies, enabling them to define their own expansion strategies.

Metro said its management and supervisory boards “will make a decision on the contemplated demerger of Metro group after a period of intensive consultation and review.”

Should the boards and shareholders be in favour, “implementation of the demerger is aimed for mid-2017,” Metro said.

“Over the past years, we have successfully revitalized our core businesses while significantly strengthening our group balance sheet,” said chief executive Olaf Koch.

“Both our wholesale and food specialist business as well as our consumer electronics business have continued to commercially improve, are on a steady successful path and are best-equipped for an independent future,” Koch said.

“Our shareholders would effectively own two well positioned market leaders, both of whom are increasingly focusing on their respective business areas and are generating more value for customers, employees and business partners.”