The Hudson’s Bay Co. has received third-party consents to sell a 50.01 percent stake in its Europe retail operations and a 50 percent stake in its real estate portfolio in Europe, to the Vienna-based Signa Group, which owns Karstadt, the German department store chain.
The transactions are expected to close at the end of November.
HBC got approval from the Federal Cartel Office, which regulates competition in Germany, for merging HBC Europe into Karstadt and to form a real estate venture with Signa. There had been concerns over the deal’s impact on workers and staff reductions, and the retail trade in Germany.
The companies also announced Monday that a real estate lending syndicate, led by Landesbank Baden-Wurttemberg, which holds the loan on certain HBC Europe real estate, has provided consent for the partnership encompassing these assets.
In Europe, HBC owns Galeria Kaufhof, the largest department store group in Germany and primary competitor to Karstad. HBC also owns Inno, Belgium’s only department store group; Saks Off 5th in Germany and the Netherlands, and Hudson’s Bay stores in the Netherlands.
In North America, HBC operates Hudson’s Bay, Lord & Taylor, Saks Fifth Avenue, Saks Off 5th and Home Outfitters.
In September, HBC disclosed its “strategic partnership” in Europe. The retail and real estate transactions will generate net proceeds to HBC of 411 million euros, or $616 million, and value the German real estate assets at a total of 3.25 billion euros. In Europe, HBC will be left with a 49.99 percent stake in the retailing operations, and a 50 percent stake in the real estate.
The transaction leads to the merger of Germany’s two department store chains, with 243 stores and annual revenue in excess of 5 billion euros. The new entity will be led by Stephan Fanderl, chief executive officer of Karstadt and Signa Retail, and include representatives of both retailers. HBC and Signa will share six board seats and have joint oversight of all major decisions for the retail company.
“Putting the two operating companies together is a no-brainer,” Richard Baker, governor and executive chairman of HBC, said in September. “It’s just tremendous value and synergies and the right thing to do. So that’s always been something that was of interest to us. As far as the structure with Signa, we think there’s a lot more value ahead of us in Europe. We think the value of the operating companies after the synergies is going to be advantageous to us.” Baker added that the deal creates “a well-capitalized retailer positioned for improved profitability.”
HBC bought Kaufhof in 2015, but for several years before officials and Kaufhof and Karstadt had entertained the possibility of merging the two to create one department store chain in Germany that would be larger and financially healthier with stronger buying clout than either of the two would have operating separately.
Karstadt HBC has significant investments in real estate joint ventures. It has partnered with Simon Property Group Inc. in the HBS Global Properties Joint Venture, which owns properties in the U.S. and Germany. In Canada, it has partnered with RioCan.
HBC is pursuing other potential transactions to cut its debt. Sources have said that HBC was conducting talks with the Neiman Marcus Group about possibly selling Saks Fifth Avenue but those talks were recently discontinued. HBC is also looking to sell off more of its real estate, including the Hudson’s Bay building in Vancouver, and has a deal to sell the Lord & Taylor flagship on Fifth Avenue in Manhattan to WeWork.
Signa Group is a privately owned real estate and retail holding company, founded by René Benko in 1999. The Signa Real Estate Group is a large real estate firm with properties in Berlin, Munich, Hamburg and Vienna, among other European cities. The portfolio includes the KaDeWe and the Upper West Tower buildings in Berlin, the Golden Quarter with the Park Hyatt Hotel in Vienna, Alte Akademie and Oberpollinger in Munich, and Alsterhaus and Alsterarkaden in Hamburg.
The Signa Retail Group has five retail platforms including the premium department store group, the home and lifestyle group, food and restaurants and sports e-commerce. Signa operates a total of more than 200 inner-city locations and 100 web shops in 20 countries.