Retailer Metro sells eastern unit for €1.1 bln

German retailer Metro announced on Friday it is selling the eastern European operations of its Real supermarket division to French rival Auchan for €1.1 billion ($1.4 billion).

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Under an agreement signed by both sides on Friday, the French retailer would "take over the operational activities and real estate assets of Real in Poland, Romania, Russia and Ukraine," the two companies said in separate statements.

The deal still needed to be approved by the competition authorities and would likely be completed next year, the companies said.

The agreement covers 91 hypermarkets in the Poland, Romania, Russia and Ukraine, where Real generated sales of €2.6 billion in 2011 and employs a workforce of 20,000.

"With Auchan, we found the most suitable buyer for Real's business activities in Eastern Europe," said Metro chief executive Olaf Koch. "Real is already very well positioned in these countries and has great growth opportunities. Auchan offers good development perspectives for the Real hypermarkets and their employees," Koch said.

Metro said that since Auchan has no operations in Turkey and wanted to solely strengthen its already existing activities in Eastern Europe, the German group would hold on to Real's operations in Turkey and in Germany.

Real's Turkish operations "have developed very nicely in recent years and show great growth potential," Koch said.

And Real Germany "forms an integral part of the portfolio of Metro Group," he continued.

"We are convinced of the potential inherent in the hypermarket business in Germany. In collaboration with the management of Real we are currently working on an action plan to leverage the existing earnings potential and to increase profitability," Koch said.

Auchan chief Vianney Mulliez said the purchase will provide the French group with the opportunity "to balance its presence in Central and Eastern Europe, its two other priority development zones being Western Europe and Asia."

Metro shares were trading higher on the mid-cap MDAX index on the Frankfurt stock exchange, where they were showing a gain of 1.34 percent in a slightly firmer market.

Last month, Metro unveiled a 60-percent drop in third-quarter profits after already slashing its earnings forecast in face of the debt crisis. The drop in earnings reflected the impact of the general economic situation in southern Europe and parts of eastern Europe and the debt crisis would continue to weigh on earnings for the foreseeable future, the company warned.

AFP/mry