Metro agreed to sell its Galeria Kaufhof stores to Hudson’s Bay for €2.83 billion ($3.2 billion), as Germany’s largest retailer parts company with the historic department-store chain after almost two decades.
The sale includes the store business in Germany and Belgium, as well as the corresponding real-estate portfolio, Düsseldorf-based Metro said in a statement. The transaction is expected to close by the end of September.
The purchase would give Toronto-based Hudson’s Bay, which also owns the Saks Fifth Avenue and Lord & Taylor clothing stores, control of a business that has been a stalwart of German shopping districts for about 135 years. By selling Kaufhof, Metro will part with the department-store chain amid rising online competition and gain more leeway to keep modernising stores and investing in e-commerce capabilities.
“With Hudson’s Bay, we have found the ideal partner for a successful future of Galeria Kaufhof,” Metro chief executive officer Olaf Koch said in a joint statement from the companies.
Hudson’s Bay, the oldest company in Canada, beat out Vienna-based Signa Retail, controlled by Austrian property developer Rene Benko, who also owns Kaufhof competitor Karstadt, people familiar with the matter said. The Canadian company’s mostly cash bid was deemed a better offer because it included labour-related concessions, a more solid financing structure and plans to grow and invest, said the people. A merger of Kaufhof and Karstadt, on the other hand, may have led to more job losses over time, one of the people said.
Jettisoning Kaufhof may help Koch improve his company’s performance. Metro’s shares have fallen 28 per cent over the past five years, to about €31, compared with a 143-per-cent increase in Germany’s 50-stock MDAX index of middle-market capitalisation companies. Hudson’s Bay shares gained 5.2 per cent on Friday to C$24.
Galeria Kaufhof was founded in 1879, and its 135 stores in Germany and Belgium occupy prime real estate in city centres. The chain, which was part of the merger that created Metro in 1996, employs about 21,500 people. Sales last year were €3.1 billion and earnings before interest and taxes were €193 million.
Bloomberg News, edited by ESM
