Praktiker Seeks Protection From Creditors on Failed Sale
Praktiker AG (PRA), the German home-improvement chain formerly owned by Metro AG (MEO), filed for insolvency after the sale of a division collapsed, and said it will focus on restructuring the business.
Units that own the Praktiker and Extra-Bau+Hobby stores and online outlets applied at Hamburg’s local court for protection from creditors, the Kirkel-based retailer said today in a statement. The Max Bahr chain won’t be affected by the insolvency move, it said.
Praktiker dropped to the lowest price since its November 2005 initial public offering today after saying yesterday that creditors wouldn’t approve a debt reorganization following the retailer’s failure to sell a stake in a Luxembourg unit. Talks on the restructuring broke down after credit insurers pulled support as they lost confidence in management’s ability to turn Praktiker around, two people familiar with the matter said.
The retailer needed more than 30 million euros ($39.2 million) to avoid insolvency, said the people, who spoke on condition of anonymity because the talks weren’t public. Private-equity company Apollo Global Management LLC (APO) considered offering credit to Praktiker before deciding the move wasn’t viable because the retailer’s creditors declined to give up their collateral, the people said.
A spokesman for New York-based Apollo declined to comment. Harald Guenter, a Praktiker spokesman, also declined to comment.
The filing is the biggest in Germany’s retail industry since drugstore chain Schlecker went out of business last year, Ralf Moldenhauer, a Frankfurt-based partner at Boston Consulting Group, said by phone.
Kingfisher Plc (KGF) Chief Executive Officer Ian Cheshire said last month that he’s looking for acquisitions as the largest U.K. home-improvement retailer detects “fault lines” in the European home-renovation market that may lead to consolidation. Praktiker’s domestic competitors include Hornbach Holding AG and closely held Toom Baumarkt GmbH and OBI Group Holding SE.
“The whole market for home-improvement retail is very fragmented, with all the companies suffering from price wars and overcapacity,” Frank Nikolaus, head of London-based investment boutique Nikolaus & Co., said in an e-mail. “Praktiker is the first victim mainly due to its weak capital structure and home-grown problems such as ruinous discounting and frequent top management changes.”
Praktiker plunged as much as 72 percent to 10 euro cents and was trading down 65 percent at 13 cents at 4:47 p.m. in Frankfurt. That propelled the stock to an 89 percent decline this year, valuing the company at 14.8 million euros.
Metro, Germany’s biggest retailer, put a 59.5 percent stake in Praktiker on the market in the 2005 IPO at 14.50 euros a share and disposed of its remaining holding the following year. Praktiker’s current shareholders include Donau Invest Beteiligungs GmbH, with just under 10 percent of the voting rights, and Maseltov Ltd. at 9.6 percent, according to its website.
Praktiker sold 55.6 million new shares in November in an effort to shore up funding. The retailer said in June that was seeking to exit Ukraine, while its Turkish business was in “orderly” insolvency proceedings. The retailer said yesterday that proceeds from the failed stake sale in the Batiself unit in Luxembourg had been “firmly included” its business plan, and that it now faced excess debt and lacked liquidity.
The first-quarter net loss widened to 127.7 million euros from 76.4 million euros a year earlier as sales dropped 10 percent. The workforce totaled 17,820 people, with German operations accounting for 5,399 jobs at the Praktiker brand, 5,068 at Max Bahr and 390 at other units. Its businesses abroad employed 6,963 workers. The store network amounted to 414 outlets, with 76 percent of the locations in Germany.
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