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European Department Stores Joining Forces

There's more consolidation under way in the European department store sector - and it's creating a Continent-wide player.

BERLIN — There’s more consolidation under way in the European department store sector — and it’s creating a Continent-wide player.

Arcandor AG, the renamed holding company of Germany’s former KarstadtQuelle AG, said Wednesday it intends to create a European premium department store alliance with La Rinascente of Italy and Printemps of France.

According to Arcandor, the Karstadt Premium department stores, La Rinascente and Printemps have agreed to take cross stakes in each other’s operations, with the aim of creating "a unique European department store portfolio and to leverage the high synergy potential."

There are currently three Karstadt Premium stores — in Berlin, Hamburg and Munich — led by KaDeWe in Berlin. A fourth Karstadt door in Frankfurt is currently being redesigned to fit the premium concept. There are a further 127 Karstadt department stores and Karstadt Sport stores located throughout Germany, which will not be part of the new alliance.

"The premium segment still has great growth potential both throughout Europe and beyond," said Peter Wolf, chairman of Karstadt Warenhaus GmbH, in a statement. "Together with our partners, we will rapidly expand the Premium Group further, ultimately setting a clear market leadership in Europe’s luxury segment."

At the same time, Arcandor said it has signed a letter of intent to sell its 49 percent share in the real estate company Highstreet, as planned. Highstreet was formed last year in partnership with Goldman Sachs to sell the remaining real estate occupied by Karstadt department stores. The value of real estate and other assets owned by Highstreet is about 4.7 billion euros, or $6.9 billion. All dollar figures are converted from the euro at current exchange rates.

The Highstreet stake was bought by a consortium made up of the Deutsche Bank subsidiary RREEF, Pirelli Real Estate and the Borletti Group, which also owns La Rinascente and Printemps. Arcandor intends to rent back the sold real estate occupied by its Karstadt stores.

The real estate deal is linked to the planned European premium department store group. The RREEF/Pirelli/Borletti consortium is to take a stake of up to 25 percent in Karstadt’s premium segment, with Karstadt possibly acquiring 25 percent of the La Rinascente and Printemps department store chains, Arcandor explained. Moreover, the parties envisage that representatives of each partner will occupy seats on each other’s supervisory boards.


The planned alliance would create a rarity in Europe — a cross-border department store chain. Borlotti already blazed that trail with the acquisition of Printemps after it bought La Rinascente, creating a group that spans Italy and France. Adding a department store in Germany, Europe’s largest economy, would further bolster the operation.

In another development, Arcandor has transferred a 51 percent stake in its catalogue operation, neckermann.de, to Florida-based Sun Capital Partners. The U.S. hedge fund paid no purchase price. Instead, according to Arcandor, "Maintaining 49 percent of the shares ensures that Arcandor will be able to enjoy returns of between $250 and $442 million (170 and 300 million euros), depending on business performance and market conditions, once the turnaround is completed and the company is subsequently sold or goes public."

Together, both parties founded a new company headquartered in the Netherlands, with each providing equity of 50 million euros, or $73.6 million.