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Arcandor Sets Emergency Share Sale

Capital increase for ailing Karstadt parent will allow firm to retain stake in Thomas Cook Group.

BERLIN — Troubled Arcandor AG, the parent company of the Karstadt department store chain, on Monday unveiled an emergency share sale in a move to avoid having to sell some of its assets.

This story first appeared in the September 30, 2008 issue of WWD.  Subscribe Today.

The capital increase will allow the company to retain its 52 percent stake in British travel business Thomas Cook Group.

Analysts welcomed the news, saying that holding on to Thomas Cook, Arcandor’s only profitable unit, is positive in the long run. Shedding Thomas Cook would have halved Arcandor’s turnover.

However, after a slight rally on Monday morning, when the capital hike was revealed, the stock price remained low. After opening on Monday morning at 2.05 euros, or $2.94, it fell sharply to end the day at 1.87 euros, or $2.67. On Friday the stock price had reached an all-time low of 1.58 euros, or $2.27, compared with a 52-week high of 24.19 euros, or $34.69. All dollar figures are converted from the euro at current exchange rates.

The decision was made by Arcandor’s supervisory board at the weekend, after its stock fell 46 percent at the end of last week. The group has been under increasing pressure because of the poor performance of its Karstadt division, which operates 90 department stores and 28 sporting goods stores. Rising costs and low consumer spending in Germany led to a drop in the group’s third-quarter earnings, pushing Arcandor to lower its forecast for 2008-09.

Over the last year, Arcandor’s shares have lost more than 90 percent of their value as a result of increasing uncertainty about the group’s future. So far, no announcement has been made about a potential change of ownership of Karstadt, and negotiations on possible international partnerships have yet to bear fruit.