Economy & Politics

Metro AG: an entrepreneurial oath of disclosure

Metro boss Koch speaks at the group's general meeting in February
Metro boss Koch speaks at the group’s general meeting in Februaryimago images / Cord

Takeover rumors and now the sale of the real hypermarkets to the Russian financial investor SCP, which will take place this Thursday – Metro AG is not making headlines. Unfortunately, it is rarely good news for shareholders. When CEO Olaf Koch announced his plan to split Metro AG almost four years ago, he painted for his shareholders the image of two thriving companies that had only been waiting to finally be given independence and thus to be led to grandiose growth. Back then, Koch and colleagues justified the radical separation step by saying that both companies, Metro and Ceconomy, were on their own more agile and capable of action and would therefore create added value for their shareholders. A conglomerate discount, which the Management Board believes would disappear in the context of the split, was also used as an argument.

Shareholder assets massively destroyed

It turned out differently. The discount, as seen in most multidivisional groups, turned out to be a conglomerate surcharge that had massively destroyed shareholder assets in the past few years with a landslide-like drop in prices. And neither company worked better, but much worse than before. Since the division of the company in 2017 and long before the Corona crisis, the combined market capitalization of Metro and Ceconomy has decreased by almost 3 billion euros compared to the capitalization of the old Metro AG.

In the past twelve months alone, Metro’s share price has developed a good 30 percent worse than the MDaxum. From today’s perspective, the 150 to 200 million euros that the implementation of this transaction is said to have devoured in costs for advisors, bankers and lawyers seem even more absurd than four years ago. The money could just as easily have been rolled up on rolls and distributed to the needy as toilet paper – the benefits would probably be greater.

Metro St share

Metro St share chart
Course provider: L&S RT

The master of financial engineering on the wrong track

The reasons for the misery are varied and almost all homemade. It starts with the ownership structure. For many years it was dominated by three major shareholders Haniel, Schmidt-Ruthenbeck and Beisheim, who often disagreed about the company’s strategy. As we know today, not necessarily to the benefit of minority shareholders. In addition, with Daniel Kretinsky, a powerful opponent has positioned himself, who now holds 29.9 percent of the shares and thus has a full blocking minority.

But there are also problems in management: the CEO may be a financial expert and, for some, even a master of financial engineering. What the Metro would need more, however, would be a trade expert. Because Metro AG has only been in reverse markets for years in important markets such as Germany or Russia, which previously stood for a large part of the Group’s earnings. This also has to do with the less visionary and hesitant leadership. So the decision to go into the supply business may have been the right one. Because this is an enormously important factor, especially for the target group of hotels, restaurants and caterers. However, the entry was too late and suffered from inconsistent implementation.

At the hypermarket subsidiary Real, too, a lack of determination was observed over many years. The pilot project “Markthalle” in Krefeld is an example of this. Well done, unfortunately it was so unrealistic that a rollout never took place. With the emergency sale completed a few weeks ago, Metro Real is now going. It is already clear that it was not good business for either Metro AG or its shareholders.

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