BERLIN — The fusion of Germany’s two department store chains, Karstadt and Galeria Kaufhof, may be nearing reality.
According to a report in the German business weekly WirtschaftsWoche Thursday, a 200-page letter of intent has been signed by René Benko’s Vienna-based Signa Group, owner of Karstadt, and Hudson’s Bay Co., owner of the Galeria Kaufhof chain.
Neither party would comment on the report, but shares of Hudson’s Bay did seem to pick up some momentum on the news, rising 2.6 percent to 12 Canadian dollars on the Toronto Stock Exchange.
WirtschaftsWoche said the document calls for a venture between Kaufhof, Karstadt and Karstadt Sport. Signa would have a stake of slightly more than 50 percent in the venture and take over management of the operative business, as well as 50 percent of the 41 Kaufhof properties held by HBC.
Reports say the real estate interests alone carry a price tag of more than 800 million euros, and that the agreement includes an additional 100 million euro payment by Signa to HBC.
The fusion encompasses 180 department and sports store doors. Although Kaufhof and Karstadt often have neighboring stores in Germany, a widespread door closure is not envisioned. A maximum of 15 poorly performing doors could be shuttered, the reports say.
Moreover, administration and buying are to be consolidated, and the Karstadt headquarters in Essen are likely to be closed. At present, the two chains employ a total of about 40,000 people.
The idea of a Kaufhof-Karstadt fusion has been making the rounds for decades, first under Karstadt and former Kaufhof owner Metro, which consistently blocked the deal. Benko, who acquired Karstadt in 2014 and had also been interested in taking over Kaufhof, put the idea back on the table when HBC won the bid for Kaufhof in 2015.
In November 2017, HBC turned down Benko’s offer of 3 billion euros for the 112-door chain. While HBC does not break out figures for Kaufhof, the chain remains in the red. Karstadt, on the other hand, recently returned to profitability.