BERLIN – Hudson’s Bay Company and Signa Holding have entered into an agreement to merge Germany’s Galeria Kaufhof and Karstadt in a move which will lead to the formation of Europe’s third biggest department store chain. The newly created department store group will have annual sales of around US$6.3bn. The merger is intended to help stave off the growing threat of online-only retailers.
“We are excited to bring together these iconic banners to create Germany’s leading retail business,” said Helena Foulkes, HBC’s CEO. “We are creating a stronger retail entity that is better positioned to capitalize on market opportunities. This transaction builds on our recent efforts to streamline HBC and provides a clear path forward to improve our European operations.”
The new company will be led by Dr Stephan Fanderl, CEO of Karstadt and an experienced German retail operator. HBC and SIGNA will share six board seats and have joint oversight of all major decisions.
Foulkes added:”We are taking strong action to strengthen our retail portfolio and enhance HBC’s profitability. This transaction creates significant value for our shareholders, enhances our balance sheet and provides a better operating platform for our European business. The creation of a stronger operator in Europe allows us to focus our attention on our North American banners, helping to ensure we are making the right strategic decisions to drive performance and profitability within those businesses.”
Richard Baker, HBC’s governor and executive chairman said: “This transaction highlights the significant value of our German real estate assets, which are worth approximately US$1.1bn more than what we paid for Galeria Kaufhof in 2015. Our partnership with Signa will serve our business extremely well as it establishes a platform to further strengthen our European retail and real estate operations. This transaction reinforces our long-term focus of unlocking real estate value through strategic partnerships, redevelopment and enhancing the credit profile of retailer tenants along with managing a portfolio of retail banners.”
The combination of the retail companies and the formation of the real estate joint venture are expected to occur within the next 90 days and are subject to approval from European competition authorities and satisfaction or waiver of customary closing conditions.