Negotiations are going on between Germany’s Metro and Chinese e-commerce giant Alibaba Group Holding Ltd for the Chinese company potentially taking up a stake in the German company’s China operations according to a report published by Reuters.
The report however carried no comments from either Metro or Alibaba.
According to the report quoting sources, the negotiations are at a preliminary stage and might not end in a deal.
Last year, Chinese firm Tencent entered into a partnership deal with France’s Carrefour which also prompted Alibaba to show interest in this deal.
Consumer focused online shopping platforms Taobao and TMall and food delivery app Ele.me are owned and run by the U.S.-listed Alibaba and the company is now reportedly trying to get into business focused retail industry according to unnamed sources quoted in the report. The report claimed that there can be better synergy for its fresh produce units Hema and Yiguo through a deal with a large wholesaler such as Metro.
In 2017, Alibaba had spent about HK$22.4 billion ($2.87 billion) for taking up a majority stake in China’s top hypermart operator, Sun Art Retail Group Ltd. That deal by the online company was aimed at developing big-data capabilities in the offline retail market for Alibaba.
On the other hand, a once thriving retail conglomerate, in recent years, the focus of Metro has been shifted to stick and concentrate on its core cash-and-carry business and has undergone a process of restructuring for that purpose. It has already divested its selling Kaufhof department stores and later separated itself from the consumer electronics firm Ceconomy. And on Tuesday this week, the company announced that it was in negotiations for selling off its loss-making Real hypermarkets chain.
So far this year, there has been significant speculation among investors about the possibility of some form of bidding on the company, which coupled with the news on its divestment, has sent its shares soaring by more than 16 per cent. The shares of the company gained 0.6 per cent after the news report from Reuters.
“Initial excitement about a bid premium will soon be replaced by worries about hollowing out the business and removing one of the few paths for sustainable growth,” said Bernstein analyst Bruno Monteyn.
There are 95 stores of Metro in China and the company also owns some real estate assets in some of the major cities and business hubs such as Beijing and Shanghai, said the Reuters report.
The report also stated that in addition to Alibaba, there are some other entities that are also in early stage negotiations with Metro and sources anticipated that the company would soon kick start the process for and official sale.
The German firm was reviewing the possibility of striking partnerships with domestic Chinese companies for the China market, said Metro Chief Executive Olaf Koch on Tuesday.
There is already a partnership between Metro and Alibaba in online retail business in the Chinese market. “We are growing continually and we are profitable there,” Koch said when Metro presented first quarter earnings.
(Adapted from Reuters.com)