In a shock move, Germany’s Metro Group announced it was examining a proposed split into two independent, individually stock-listed companies.

The wholesale and food specialist group will comprise Metro, Makro and their associated entities as well as the Real hypermarkets arm, while the consumer electronics products and services group will encompass Media-Saturn and its portfolio of formats and brands.

The two businesses, it said, would be market leaders in their respective sectors, with their own distinct profiles, management and supervisory boards.

According to Metro Group, the two businesses “currently have very limited operational overlap and very limited synergies”. The move is intended to give each of the companies and their respective management full control over their corporate strategies.

Both entities will benefit owing to an improved focus, simplified structures and quicker decision-making processes.

It will also stimulate accelerated growth of the businesses, provide streamlined product ranges, more flexibility and entrepreneurial freedom, as well as improved operational efficiencies.

In addition, it will make the distribution and utilisation of investment capital in both of the new entities clearer.

Intervention

Some have suggested that Media-Saturn co-founder and minority stakeholder Erich Kellerhals could intervene to prevent the demerger.

But Metro Group chief executive Olaf Koch – who would lead the wholesale and food business under the demerger proposals – insisted that this would not be possible, as Kellerhals had no influence over Metro AG decisions.

When asked by Planet Retail about implications for manufacturers and how their dealings with Metro Cash & Carry will be impacted, a Metro AG spokesman said supplier relationships would remain the same. There were almost no overlaps between the product ranges of the two different entities, they added.

Subject to supervisory board approval, the grocery entity would be overseen by Koch, while Media-Saturn chief executive Pieter Haas would head up the consumer electronics entity.

The implementation of the demerger is scheduled for mid-2017, when both companies would be given new company names.

Metro has strengthened its balance sheet over the past years thanks to successfully closing the sale of its Vietnamese cash and carry business, the international Real hypermarket chain and the Galeria Kaufhof department store division. It now boasts a very solid financial base, which is a good precondition for such a spinoff.

Exclusive strategies

We very much welcome the split as the two divisions, grocery and consumer electronics, have completely different areas of focus. Each entity needs full control and an exclusive strategy to improve its performance.

With the spinoff, the separate divisions will be free to independently pursue acquisition and partnership strategies, enabling it to define its own expansion strategies – a much easier path than within the current complex conglomerate.

The move will be particularly positive for Media-Saturn, which has developed well recently and still provides great potential going forward.

Customers have appreciated the link between bricks-and-mortar shops and its online business, as well as its services offer. This is a benefit the likes of Amazon cannot offer and will therefore help customer retention.

Post-demerger, the new independent entity will be able to invest even more in a forward-focused strategy based on innovation, online and services. This will only increase the overall value of the company.