* IPO eyed for Kaufhof given lack of buyers
* Financial investors seen possibly interested in Real
* German retail sales fall unexpectedly in May
By Victoria Bryan
FRANKFURT, July 1 Growing fears over the
strength of Germany's consumer recovery could hamper efforts by
Metro (MEOG.DE), the country's largest listed retailer, to
offload its Kaufhof department stores and Real hypermarkets.
Metro has long been looking for a way out of its Kaufhof and
Real businesses to focus on opprtunities offered by emerging
markets at its cash & carry and MediaMarkt-Saturn electronics
Disposals are now back on the agenda after the group said it
was in informal talks over their future. [ID:nLDE75Q0G6]
The biggest problem when it comes to finding a buyer is the
two units' exposure to their home market. Kaufhof is virtually
unheard of outside of Germany, while Real gets two thirds of its
sales from Germany.
While Germany is Europe's strongest economy, it does not
offer the growth rates of emerging markets such as Russia and
China, where Metro is driving expansion of its cash & carry
outlets and MediaMarkt-Saturn stores.
In addition, German retailers' good start to the year may be
losing steam. Despite low unemployment and predicted economic
growth of 3.3 percent this year, retail sales fell unexpectedly
in May, though economists said an E.coli outbreak that led to a
drop in food sales was a major factor. [ID:nLDE75T08M]
One banking source said Metro was looking at floating
Kaufhof due to a lack of suitable buyers, adding an initial
public offering would take many months.
One analyst who did not wish to be named said: "I would not
expect anything soon", adding he suspected Real's German
business was worth nothing, with most of Kaufhof's value being
its prime city centre real estate.
For a while, Metro was keen to merge its Kaufhof department
stores with those of local rival Karstadt, but chief executive
Eckhard Cordes said in May he had given up trying to persuade
Nicolas Berggruen, who rescued Karstadt from insolvency in 2010,
of the merits of the plan. [ID:nLDE74E0GZ]
JP Morgan analysts said a management buyout was an option
for Kaufhof. "Using the existing Kaufhof chain as a cash cow to
build a portfolio of brands seems an interesting way to go for
us," they said in a note.
With domestic rivals out of the picture for Real for
antitrust reasons, and international players like Wal-Mart
(WMT.N) having had their fingers burnt once by a German food
market dominated by discounters like Aldi and Lidl, a financial
investor might make more sense.
"Wal-Mart probably can earn a lot more money, much easier
elsewhere, simply by keeping expanding in China, India and
Africa," Planet Retail analyst Boris Planer said.
"What looks likely is Real being acquired by a financial
investor who then may or may not float Real on the stock
exchange with a growth perspective towards eastern Europe."
Estimates for the value of the two businesses vary wildly --
from 3.0-7.7 billion euros ($4.3-$10.9 billion).
Offloading one or both of the two units could, however,
boost Metro's shares which have lost almost a quarter of their
value this year, by cutting its exposure to Germany.
The shares currently trade on 10.2 times estimated full-year
earnings, compared with 13 for French group Carrefour (CARR.PA)
and an 11.3 multiple for Wal-Mart, according to Thomson Reuters
Pulling off a deal could also provide a shot in the arm for
Cordes, who regularly gets asked at press conferences if he is
going to retire when his contract comes up for renewal in 2012.
(Additional reporting by Philipp Halstrick, and Mark Potter in
London; Editing by Dan Lalor)
($1 = 0.7062 euro)
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