Glenboden M & A Originations

Who will acquire Real in central Europe ?

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Origination Status proprietory origination, November 2012
Asset 91 'Real' hypermarkets in Poland, Romania, Russia and Ukraine
Buyer Groupe Auchan SA (France), major international diversified retailing group
Seller Metro AG (Germany), no.5 global diversified retailing group
Buyer Rationale achieve greater mass in hypermarkets in CEE
Seller Rationale focus on domestic 'Real' operations and cash & carry concept in CEE
NBs transaction includes related real estate but excludes 'Real in Turkey'
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In spite of Metro's denials, there's been a lot of speculation recently about that group's imminent sale of its 'Real' hypermarket chain in central and eastern Europe. Several factors point to that happening soon; we believe that the most likely acquiror is Auchan. Thereafter the consolidation focus may shift to the discount segment.

Metro strategic focus on cash & carry ...The Metro group of Germany, which owns Real, has clearly stated its change in international strategy to focus on cash & carry, through its Makro subsidiary which is the global no.1 in cash & carry.

This focus is understandable given the huge growth potential in central Europe for the cash & carry format, as well as the relatively low level of competition there compared with hypermarkets.

Taking Poland as the proxy for the region, the 'soft' consolidation of the traditional trade, through the creation of franchise networks, is proceeding apace. Makro, through its 'Odido' ensign, is driving that in parallel with Carrefour.

... Auchan by process of elimination ...As a result, Reals' development has been stagnant, which strongly evidences that it's being teed up for divestment. By a process of elimination, we believe Auchan is the most likely buyer.

Of the other retail chains with a hypermarket format focus, Carrefour is strongly focused on convenience stores and franchising going forward, while Tesco is clearly implementing an organic strategy of new store openings.

That leaves the strangely quiet Auchan as the remaining candidate, which by acquiring Reall will treble in size in terms of number of stores in Poland (see chart), and double to nearly 200 stores in CEE overall..

... further retail consolidation likelyAfter such a consolidation, the focus will shift in our view towards the discount segment, which depending on definition is quite crowded with Biedronka, Lidl - Kaufland, Netto, Intermarche (and Aldi) all playing in that space (see chart).

The star performer amongst discounters is Biedronka, which is growing at the breath-taking speed of 200 to 300 stores per annum, and has become the main customer for large swathes of the Polish food industry.

Some believe that the Portuguese owners of Biedronka may wish to cash-in while they're so far ahead. Buyer candidates include the two big German discount groups, Lidl and Aldi.

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Size (€ mln) 1.100
Sector retail
Asset Quality CEE hypermarket chain
Seller large plc
Buyer private corporate
P/S 0,4
P/Ebitda n.a.
Type enterprise value
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