May 30, 2012 / 11:58 AM / 6 years ago

Booker snaps up Metro's UK cash & carries

LONDON/BANGALORE (Reuters) - British group Booker (BOK.L) is to buy the loss-making British cash & carry operations of German retailer Metro MEOG.DE, giving it more customers and products and taking a long-running problem off Metro’s hands.

For Booker, which focuses on caterers and independent retailers, the 140 million pound ($219 million) cash and share deal will expand its reach with the hotels, restaurants and small and medium-sized businesses that are the usual customers of Makro UK.

“That will help us become the UK’s leading wholesaler not just in food but also non-food,” chief executive Charles Wilson told Reuters.

Wilson said the deal would increase revenue at Booker, which has a 12-13 percent share of the 30 billion pound wholesale market, by around 20 percent from its current level of 3.9 billion pounds.

Makro’s 30 British stores offer 29,000 products, compared with Booker’s 172 stores offering 8,500 products.

Metro will receive 15.8 million pounds and a 9.99 percent stake in Booker, which it said it would look to keep beyond a 12-month lock-up period.

The deal pleased investors in both companies, with Booker shares jumping 8.4 percent to 85.75 pence at 0936 GMT and Metro up 1.7 percent, the only gainer on Germany's DAX index of leading companies .GDAXI.

“This deal brings additional scale, takes a major player out of the market, adds a large number of customers and stock keeping units and brings a relationship with Metro,” Peel Hunt analyst Charles Hall said in a note.

MAKRO WOES

Metro had most recently tried to improve the fortunes of Makro UK, which had a 2 percent market share, by appointing new management last summer.

“Makro sales and earnings have declined now for a number of years. Market trends were largely missed and transforming the business model was not as successful as other places in Europe,” Metro chief executive Olaf Koch told analysts on Wednesday.

Koch took over as CEO of Metro at the start of the year and has since then been working on improving sales and cutting out overlapping administration functions within the group.

He has said the group, which also runs consumer electronics stores, hypermarkets and department stores, would be ruthless in concentrating investment only on areas that provide satisfactory returns.

“The UK business has not been able to generate returns that Metro requires. This (disposal of Makro UK) shows that we have started to transform the company and are decisive,” Koch said on Wednesday.

He added that other cash & carry operations were under review, but that none of them were the size of Makro UK. Analysts expect those countries under review to include Portugal, Denmark or Japan.

Koch also said it was reviewing the situation at its Real hypermarkets chain, with a decision to be communicated by the end of the third quarter.

Metro added that based on the current value of Makro UK it expects to book a negative non-cash impact on earnings before interest and taxes (EBIT) of around 200 million euros ($250.7 million) in the current quarter.

Booker said the deal would dilute earnings in its year to March 2013 and add to earnings in the first full year following integration.

($1 = 0.6378 pound = 0.7977 euro)

Additional reporting by Harro ten Wolde; Editing by Helen Massy-Beresford

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