Praktiker Looks at Bankruptcy Filing on Failed Disposal

Praktiker AG (PRA), the German home-improvement chain formerly owned by Metro AG (MEO), will file for insolvency today after the sale of a division collapsed, potentially putting thousands of workers out of their jobs.
Praktiker will seek protection from creditors for the holding company and some German parts of the group, Harald Guenter, a spokesman for the Kirkel-based retailer, said today. Praktiker dropped as much as 72 percent to 10 cents and was trading down 63 percent at 14 cents as of 12:34 p.m. in Frankfurt, the lowest price since Praktiker’s initial public offering in November 2005.
Creditors declined yesterday to approve a debt reorganization that became necessary after a potential buyer of a stake in Luxembourg-based unit Batiself SA decided against a transaction, Praktiker said in a statement. Operations abroad and the Max Bahr brand won’t be affected by an insolvency filing, Praktiker said in a separate statement to employees.
The filing is the biggest in Germany’s retail industry since drugstore chain Schlecker went out of business last year, Ralf Moldenhauer, a Frankfurt-based partner at Boston Consulting Group, said by phone.
Praktiker sold 55.6 million new shares in a capital increase in November in an effort to shore up funding. The retailer said in June that was seeking to exit Ukraine, while its Turkish business was in “orderly” insolvency proceedings. The German retailer said yesterday that proceeds from the failed Batiself stake sale had been “firmly included” its business plan, and that it now faced excess debt and inadequate liquidity.

German Workforce

The group workforce as of March 31 totaled 17,820 people, with German operations accounting for 5,399 jobs at the Praktiker brand and 5,068 at Max Bahr, according to the retailer’s first-quarter financial report. Its businesses abroad employed 6,963 workers. The store network amounted to 414 outlets, with 76 percent of the locations in Germany. The first-quarter net loss widened to 127.7 million euros ($167 million) from 76.4 million euros a year earlier as sales dropped 10 percent.
Kingfisher Plc (KGF) Chief Executive Officer Ian Cheshire said last month that he was looking for acquisition opportunities for the largest U.K. home-improvement retailer because of “fault lines developing” in the European home-renovation market that would lead to consolidation in the coming years.
Praktiker’s current shareholders include Donau Invest Beteiligungs GmbH, with just under 10 percent of the voting rights, and Maseltov Ltd. at 9.6 percent, according to its website.