German retailer Metro proposes split, shares soar

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Metro split plan is a ‘logical step’: Analyst
Metro split plan is a ‘logical step’: Analyst

European retail and wholesale group Metro has announced plans to split itself in two, separating its food and wholesale activities from its consumer electronics chain.

Metro, based in Duesseldorf, Germany, said Wednesday that the move would give both companies "improved focus, quicker decision-making processes, more flexibility and improved operational efficiency."

The proposal would produce a food specialist and wholesale business including Metro cash-and-carry stores and Real supermarkets, and a consumer electronics products group including Saturn and Media Markt stores.

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Metro said the businesses "currently have very limited operational overlap and very limited synergies." The plan is for its shareholders to receive shares in both resulting companies.

If a review of the strategy is favorable and shareholders back the plan, the company aims to complete the split in mid-2017.

Following the announcement, Richard Clarke, a retail analyst at Bernstein, told CNBC that the market had been expecting Metro to make a move like this for a while, with the retailer having traded at a "conglomerate discount".

"It enables more targeted management teams, more transparency and it's a positive for the business and it is a logical step and we did expect it to happen at some point down the line," Clarke added.

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Metro revealed that the group's demerger would enable each group to independently engage in acquisition and partnership strategic opportunities, which Clarke believed would be a possible option for both companies to pursue under the new restructuring plan.

Clarke added that he saw the total value and revenues as being much higher in the food and wholesale group, which would potentially gain more investor attention.

Shares in the retailer jumped in European markets following the news, trading near the top of the pan-European STOXX 600, posting gains of up to 14 percent.

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