Economy
Hungary CBA founder in talks with multinationals after sale to Lidl
The best Baldauf stores are taken by Lidl, so what can we buy now?
, a high-ranking officer of a multinational retailer asked at the company’s headquarters after it became evident for the market too that several CBA stores will belong to Lidl.Lidl took a large package
It became public on Tuesday that László Baldauf is selling off his assets. Lidl informed competition watchdog GVH that it is taking over the operating rights of seven CBA stores from Baldauf. Based on the 11 December announcement, the agreement between the parties affects the following stores:- Center Veresegyház
- Center Üröm
- Center Szada
- Budapest, Ferenciek tere
- Budapest, Rákóczi út
- Budapest, Remete
- CBA-Aranyherceg
To our best knowledge, Baldauf is planning to give up additional stores and he is engaged in negotiations about these.
Others would exit too?
After Lidl, Spar is next in line the founder of CBA will be talking to about selling his stores to
, a source with knowledge of the retail sector told Portfolio, adding that the CBA-Lidl package was the largest they agreed on.The source said Baldauf wants to sell his stores in the country “in a package deal", while would-be buyers would prefer if they could cherry-pick because they are concerned about feeble purchasing power and that the renovation of the stores would cost a pretty penny.
After Baldauf’s “exit", other CBA leaders are contemplating opting out, but we should not expect that to happen before the elections
, one of our sources said.It would be a rather sensitive issue if several CBA managers sold units before the elections due next spring, while it might be a big temptation for them that the stores would sell at great prices at present, since the so-called plaza ban and rising retail sales have been driving prices higher. In other words, if a retail chain wants to expand, the only way to do it is acquisitions.
CBA Kereskedelmi Ltd. communications director Attila Fodor denied to us that “several members of management" would be systematically scaling down their holdings. There is a single Príma store that CBA Supervisory Board Chairman Zoltán Dienes is letting out at Újhegy Shopping Yard.A source asking not to be named told us that Dienes let out his store to Auchan.
It’s a standalone deal, nothing more, Fodor told Portfolio. It is a characteristic of the franchise system that members buy and sell stores all the time, as they are aiming for an economic operation.Regulations don’t help
Local retail stores really started running the gauntlet when the Sunday shopping ban was implemented, and - as several studies attested - multinational companies manged to improve their position at the expense of local chain stores. The next nail in their coffin was the sharp raise to the minimum wage and the minimum wage to skilled workers this year, and further hikes are pencilled in for 2018. In the sector where demand for human resources is high, owners have also been faced with the problem of labour shortage that was also driving wages higher. The Central Statistical Office (KSH) and other market experts had found earlier that the introduction of online cash registers (linked directly to tax authority NAV) and the Electronic Trade and Transport Control System (EKÁER) also delivered smaller stores a blow.Exiting might be difficult for other players, though, as the CBA story is extremely sensitive politically for the government that could just put a crimp in any further deals.
One of our sources said the following in this respect:I think a gradual sell-off is the most likely.
The current situation does not suggest at all that the majority of the retail sector will be in Hungarian hands, a goal Prime Minister Viktor Orbán had set several times. Consequently, it is also a key question what kind of regulations we can expect in the retail sector after the elections.We have tried to speak to László Baldauf about his divestments, and we inquired at Spar about how the negotiations progress. We have not received any answer yet, but Fodor underlined that Baldauf is currently not willing to comment. If an agreement is reached about the further use of his stores, he will inform the press about it, Fodor added.
What will be the next move by the GVH and Lidl?
The competition authority is unlikely to thwart the changes we have learned about so far, since the taking over of Baldauf’s seven CBA stores does not represent a massive change on the market, given that Lidl operates 170 units.The sale will most likely entail some restructuring, as well, considering that Lidl operates its stores much more efficiently than CBA. Blokkk.com highlighted that Lidl boasts the highest income per capita among local food chain stores, which is around HUF 80 million, versus HUF 23 bn at the CBA-Baldauf Ltd. in 2016. It is also true, though, that the stores sold do not represent the CBA average, they likely operate much more efficiently.
We have also learned that Baldauf tends to stand up for his employees and staff issues regularly come up at the talks.
You may ask why not local chains buy the CBA stores. The answer is simple. They either do not want or could not purchase these stores. They are not even in the same league with the multinationals, and lack the necessary capital for such transactions.Baldauf already in retirement
László Baldauf, 76, has already retired. He resigned as CBA Chairman as of 1 January 2016, and was replaced by Vilmos Lázár. State newswire MTI reported Baldauf’s resignation on 24 November 2015. He was elected honorary chairman at the company’s general meeting.Baldauf started his career on 1 September 1955 at the Csemege food chain store. He was store manager at Budapest’s Ferenciek tere at the age of 17 and head of the Csemege store No.46 at the Keleti Railway Station at the age of 19. He left Csemege after 25 years in 1980 and started his own business, opening grocery stores all over town. He kicked off the CBA story in 1992 with ten colleagues and 17 stores.
(Front page photo by MTI Fotó: Balázs Mohai)
