Metro AG (MEO), Germany’s biggest retailer, will pay about 230 million euros ($309 million) for a stake in its Media-Saturn electronics unit, according to a person familiar with the matter, implying a valuation for the division that exceeds the company’s entire market value.
The price for the 2.97 percent stake being acquired from Media-Saturn co-founder Leopold Stiefel is based on a 2002 agreement with the chain’s founders, said the person, who asked not to be identified because the negotiations are private. A Metro spokeswoman declined to comment on the price, saying only that the transaction will be completed in the first half.
“The price seems very high compared to what the company is worth today, but it also seems high in comparison with 2002 because the business was much smaller in terms of revenue back then,” said Sebastian Frericks, an analyst at Bankhaus Metzler in Frankfurt. “It’s a good deal for Stiefel.”
The implied valuation for the unit of about 7.7 billion euros compares with Metro’s market capitalization of 7.5 billion euros. The Dusseldorf-based retailer gets about a third of sales from the electronics unit and has seen its market value slump about 60 percent in the past five years, with declining earnings at Media-Saturn contributing to the drop.
Metro fell 0.4 percent to 22.84 euros at 1:49 p.m. in Frankfurt trading. The stock has rebounded 8.8 percent this year after sliding 48 percent in 2011 and 26 percent in 2012.
The purchase of the stake in Media-Saturn increases Metro’s holding to 78.38 percent, leaving Stiefel’s fellow co-founder Erich Kellerhals as the only other shareholder.
Metro has been in a dispute with Kellerhals over the influence he still wields over the business. In August, the retailer won dismissal of an appeals case seeking to block a corporate governance change at Media-Saturn meant to cut the sway exerted by the Media Markt founder.
Contract talks are taking place between Metro and Stiefel and he will remain an adviser to Media-Saturn, according to a statement from the Stiefel family.
“We very much welcome his willingness to continue to be involved in the company,” Metro Chief Executive Officer Olaf Koch said in a separate statement today.
Koch has pledged to focus on the Cash & Carry wholesale unit and Media-Saturn electronics stores. The owner of Kaufhof department stores and Real supermarkets reported little changed fourth-quarter revenue on Jan. 16 as increased sales at Media- Saturn in Germany offset weakness in western Europe. It also announced that day that the electronics chain is leaving China.
Metro cut its 2012 profit forecast in October because of weakening economies in southern Europe and parts of eastern Europe. It forecast 2012 earnings before interest, tax and other items to be about 2 billion euros.
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