Metro AG’s share price down, to sell its Vietnam-based stores in a €655-million deal

Metro AG revealed that it has decided to sell 19 of its stores located in Vietnam to the Thai distributor Berli Jucker. The company, which is based in Germany, is withdrawing from the country as part of its strategy to sharpen its focus and invest in improving its performance in other regions.

Metro AG is to sell its wholesale stores located in Vietnam in a deal valued at about €655 million ($876 million). As reported by the Financial Times, Mr. Olaf Koch, who is the Chief Executive Officer of the company said in its statement “This transaction will allow us to invest into the further growth of Metro Group and further strengthen our balance sheet.”

In addition, the sell is to boost Metro AGs operating profit to a “mid-three-digit” million euro over the current financial year. Chief Executive Officer Mr. Koch also explained that Metro would still see Asia as a market of great importance for the company, despite the deal.

The deal will need the approval of relevant regulatory authorities, but if completed successfully, it is expected to increase the earnings before interest and taxation of the Germany-based company in the 2014/2015 fiscal year by about €400 million.

Currently, the companys cash-and-carry business located in Vietnam has about 3 600 employees. Its reported sales over the fiscal 2012/2013 year were €516 million. Recently, Metro AG has undertaken a strategy of disposing of its non-core businesses as it shifts focus to its major cash-and-carry business in Germany.

One of the analysts, who work at Exane BNP Paribas – Mr. Andy Gwynn commented in a note to customers, which was cited by Bloomberg: “The transaction is a reminder of some of the significant value ‘hidden’ in the business, notably in property assets. It remains to be seen if Metro can repeat the sales multiple on a wider scale — Vietnam was probably one of Metro’s least-developed markets.”

Metro AG was 1.7% down to trade at €24.58 per share by 10:13 GMT, marking a one-year change of -13.74%. According to the information published on the Financial Times, the 30 analysts offering 12-month price targets for Metro AG have a median target of €31.00, with a high estimate of €43.00 and a low estimate of €24.00. The median estimate represents a 23.53% increase from the last price of €25.10.