Billionaire Shopper Is Happy to Wait in Line

(Bloomberg Opinion) -- Olaf Koch, chief executive of the German food wholesaler Metro AG, looks to have seen off a 5.8 billion euro ($6.5 billion) takeover attempt by the Czech billionaire Daniel Kretinsky. That's both a blessing and a curse.

On Monday, the bidding vehicle for Kretinsky and his business partner Patrik Tkac, said it had failed to convince two of the cash-and-carry group's founding shareholders to back its 16 euro per share offer.

With the holdouts (the Meridian Foundation and the Otto Beisheim Foundation) owning more than 20% of Metro's shares, Kretinsky's EP Global Commerce is unlikely to reach the 67.5% threshold for the transaction to succeed. The bidder said it won't raise its price nor lower the minimum acceptance threshold. So the offer, due to expire on Wednesday, will probably lapse. Shares in the target company fell by about 6% to just above 14 euros on Tuesday morning.

While Metro hasn't responded to the Kretinsky vehicle's statement, it no doubt welcomes the likely vanquishing of its predator. The grocer had argued that EP Global's offer undervalued the group and that it had better prospects on its own.

This is no unalloyed victory, though. Metro must now deliver on its promises. The company has struggled to improve its poor performance after a profit warning in April 2018, which was driven by problems in its Russia business, and a subsequent cut to its earnings outlook. While there was some improvement in its fiscal third quarter, helped by faster-growing markets such as supplying hotels and restaurants, it has a long way to go.

There's one bright spot: The company is in talks to dispose of its Real hypermarkets unit and is trying to sell a stake in its China operations. These deals could deliver proceeds of more than 1 billion euros.

Even so, it's hard to see why the group's prospects will be much different from here on. Booker, the British wholesaler that is now part of Tesco Plc, was able to rejuvenate Metro's British arm after it acquired the unit in 2012. But the German company hasn't managed to do the same with its own businesses.

If things don't improve significantly in the next year, then Koch will be under severe pressure after seeing off the bid. What's more, Kretinsky will still have a 17.5% stake in Metro and could agitate for change. That's not a comfortable position for any chief executive.

As we've noted before, the bidder is in a decent position whatever the outcome. If Koch does finally turn around Metro, Kretinsky would benefit as a big shareholder. If not, he can return with another bid. Should Metro continue to struggle, his hand may actually be strengthened.

To contact the editor responsible for this story: James Boxell at jboxell@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Andrea Felsted is a Bloomberg Opinion columnist covering the consumer and retail industries. She previously worked at the Financial Times.

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