Editor’s Note
Reports indicate that Chinese e-commerce giant JD.com is in talks to acquire Germany’s Ceconomy, parent company of the MediaMarkt-Saturn retail chain, in a potential billion-euro deal. This highlights the ongoing global consolidation in the retail sector and the strategic moves by major online players to expand their international physical footprint.
China’s second-largest online retailer, JD.com, is attempting to acquire the German electronics retailer Ceconomy, which owns MediaMarkt-Saturn. This could become a billion-euro deal.
MediaMarkt has long struggled with its online strategy. Now, it could be swallowed up by a Chinese online retailer.
What has been common practice in the commodities business or industry for years is now increasingly occurring in retail: large non-European investors, often from China, are taking over European companies. In the case of the potential takeover of MediaMarkt-Saturn by the Chinese e-commerce company JD.com, which emerged this week, talks appear to be already well advanced. This is at least indicated by an ad-hoc announcement published by MediaMarkt-Saturn’s parent company Ceconomy on Thursday afternoon, as reported online by “Die Presse.” In Austria, the two brands merged in 2020 and now operate solely under MediaMarkt. A lot of money is at stake in this deal. According to the news agency Bloomberg, Ceconomy is currently valued at around 2.2 billion euros.
JD.com is reportedly considering a cash offer of 4.60 euros per Ceconomy share. The potential offer price is thus 23 percent above the share price level before the announcement of the offer, which was around 3.75 euros per share. The share has since risen to around 4.20 euros. The fact that it has not yet reached the offer price is related to the absence of any binding agreements. It is therefore unclear whether JD.com will actually submit an official takeover offer. In the event of a takeover, the Chinese online giant would have bought a brand already established in Europe.
This would primarily affect brown goods, i.e., consumer electronics. Renowned suppliers from Korea or Japan would likely be pushed back. For white goods, which include household appliances, Chinese brands would not yet carry much weight, according to Kreutzer. He also does not see manufacturers like Siemens, Miele, Bosch, or Braun as immediately threatened by the potential takeover. This de facto does not affect Austria, because “we hardly produce such goods anymore.”
The fact is that JD.com is currently in talks with Ceconomy’s major shareholders, whose approval is considered crucial for a deal, according to people familiar with the matter speaking to Bloomberg. Some shareholders are reportedly hesitant to irrevocably commit to tendering their shares, which could jeopardize the transaction. Major shareholders of Ceconomy include the holding company of the Kellerhals family, which founded MediaMarkt, as well as the family-owned company Franz Haniel & Cie. Other top investors are vehicles linked to the Schmidt and Beisheim families, who founded the retail group Metro.
JD.com is seeking international acquisitions in light of the weak economic climate in China. Last year, the company examined the takeover of the British electronics retailer Currys but withdrew. JD.com’s logistics network would complement Ceconomy’s brick-and-mortar business, which, according to its website, has over 1000 stores across Europe with 50,000 employees.
Ceconomy recently achieved annual sales of 22.4 billion euros, of which online shops contributed 5.1 billion euros. According to Kreutzer, the company has not yet optimally succeeded in expanding online trade. “Brick-and-mortar retail apparently doesn’t understand the online business so well.” Why? Because, as Kreutzer explains, the online business must be built up long-term separately from brick-and-mortar retail, as it is simply subject to different framework conditions. This applies especially to the logistics of shipping – and above all, returns. “For a good online business with larger electrical goods, a freight forwarding company is quickly needed.” Many chains currently focusing on “Click & Collect” (view online and pick up in-store) cannot offer this. However, there is no more growth in brick-and-mortar retail. On the contrary: especially large-scale stores like MediaMarkt-Saturn often have to accept a decline in sales, according to Kreutzer.
JD.com, in turn, is one of the dominant players in online business in China. Locally, the competition is primarily about the shortest delivery times. JD.com operates a logistics network similar to Amazon’s.