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Metro sells majority stake in Chinese unit to Wumei

German wholesale food retailer Metro AG said Oct. 11 that it agreed to sell its entire stake in Metro China to Wumei Technology Group Co. Ltd.

The deal values Metro China at an implied total enterprise value of €1.9 billion and an enterprise-value-to-sales multiple of 0.7x based on its fiscal year 2017-2018 sales. An enterprise-value-to-EBITDA multiple of 12x is expected due to Metro China's strong EBITDA of €153 million for fiscal 2017-2018.

Metro said it expects to receive over €1 billion in net proceeds and a 20% stake in a resulting joint venture. Metro China's minority shareholders plan to divest their total 10% stake in a separate process, the company added.

The German company said it will take advantage of the 20% stake in the joint venture to look into several strategic partnership opportunities with Wumei and its technology partner, Dmall, specifically in terms of international sourcing of goods. It also expects core customers HoReCa and Trader to account for 70% of its global sales.

"We welcome the investment of the new majority owner for Metro China who shares our values and is committed to building on our track record and footprint in China. This transaction also forms a strategic partnership that will result in greater competitive advantages for Metro China," Metro CEO Olaf Koch said in a statement.

Metro China, which began operations in 1996, posted €2.7 billion in sales in fiscal 2017-2018 and has 97 stores around China.

The transaction is expected to close by the second quarter of 2020, subject to customary government and regulatory approvals in China.