German retailer Metro confirms the sale of its Vietnamese operations to Thai company Berli Jucker for €655 million.
Metro to focus on strategic markets
Metro entered the Vietnamese market in 2002, building up operations which now comprise of 19 cash and carry stores, generating sales of €516 million in fiscal 2013. The deal is expected to come to fruition in the first half of next year.
The exit is in keeping with Metro's strategy to focus on strategic markets. Metro has come under pressure from investors to strengthen its balance sheet. The sale will improve Metro's EBIT by a three-digit million euro sum, and will allow greater flexibility to pursue growth opportunities in its winning markets including China and domestic Germany. The news follows the recent finalisation of the sale of Real stores in Turkey.
What will Metro's mixed performance in Asia mean for future investment?
While Metro is keen to emphasise its continued commitment in Asia, and has highlighted intentions to invest in these businesses, its performance in the region has been mixed. The Chinese market is a key performance driver, where Metro plans to have 100 stores by 2015 and capture higher growth potential in second and third tier cities. It also hopes to tap into the ecommerce opportunities and recently launched click and collect in Shanghai. India too will see expansion: Metro plans to triple store numbers over the next six years, despite increasing competition from new entrants into the channel.
However, profitability in Kazakhstan has proved challenging, growth continues to be slow in Japan, and Metro's performance in Pakistan has been patchy. As the Metro Group continues to pursue its strategy of simplifying its operations to unlock growth, this may not be the last Asian market exit.
Deal a significant shake-up in Vietnamese grocery
Recent market entries from AEON and Central Retail, as well as scaled up plans for Auchan and a new partnership between NTUC FairPrice and Saigon Coop signify the attractiveness of the market for investment.
Metro's stores are present in 14 cities, and cover close to 110,000 square metres of sales area, making it the largest international grocery retailer in the market: in Vietnam'a grocery market, where new store openings can be a complex understaking this presents a sizeable opportunity for buyer Berli Jucker (BJC).
Thai trading and manufacturing company BJC's retail operations include convenience chains in Thailand and Vietnam (B's Mart banner). The acquisition will accelerate the company's plans for aggressive expansion across south east Asia, offering a access to a well-invested supply chain infrastructure, and a step into larger format grocery stores.
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