Alibaba in Talks with Germany’s Metro

Alibaba Group Holding Ltd Chinese e-commerce giant is in meetings with Germany’s Metro about taking a stake in the German wholesaler’s China operations.

Alibaba group sign.

Metro and Alibaba refused to comment.

The meetings are at an early stage and could still fall apart, the sources said.

Alibab’s interest comes after opponent Tencent a year ago signed a partnership deal with France’s Carrefour.

U.S.-listed Alibaba, which runs customer-facing online shopping platforms Taobao and TMall and food delivery application Ele.me, is looking to develop a business-concentrated retail method, said one of the source. Teaming up with a wholesaler like Metro could also bring collaboration to its fresh produce units Hema and Yiguo, the source added.

Any deal would add to the HK$22.4 billion ($2.87 billion) Alibaba spent in 2017 on a major stakein China’s peak hypermart operator, Sun Art Retail Group Ltd, as part of a push to make big-data abilities in the offline retail market.

For its part, Metro was once a sprawling retail conglomerate but has been restructuring in recent years to focus on its core cash-and-carry business, selling Kaufhof department stores and then splitting from consumer electronics group Ceconomy.

For its part, Metro was once a sprawling retail conglomerate but has been restricting in current years to concentrate on its core cash-and-carry corporate, selling Kaufhof

It is also trying to offload its loss-making Real hypermarkets chain, saying that the sale is progressing.

Metro shares, which have increased 16 percent this year on speculation of a feasible offer for the corporation and news on divestments, were up 0.6 percent.

“Initial excitement about a bid premium will soon be replaced by worries about hollowing out the business and removing one of the few paths for sustainable growth,” said Bernstein analyst Bruno Monteyn.

Metro has 95 stores in China and real estate assets in major centers, such as Beijing and Shanghai, one of the sources said.

Aside from Alibaba, there are other parties involved in early discussions with Metro, according to the sources, with an official sale process anticipated to kick off soon.

Metro Chief Executive Olaf Koch said that the German company was reviewing possible partnerships with local players in China.

Metro and Alibaba have already partnered in online retail in China. “We are growing continually and we are profitable there,” Koch said when Metro presented first quarter earnings.

Metro reported that same store sales in Asia increased a currency adjusted 7 percent to 1.04 billion euros ($1.17 billion) in the October to December quarter.

The feasible China move comes as Czech investor Daniel Kretinsky is preparing a possible offer for Metro, people close to the matter said a news agency a month ago.

Global Commerce (EPGC), a vehicle co-owned by Kretinsky and Slovak investor Patrik Tkac, is anticipated to have the financing and other arrangements in place to be able to declare a tender bid for Metro as early as March, the people added.

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