The logo of the Galeria Kaufhof department store is pictured in downtown Frankfurt, Germany. Photo: Kai Pfaffenbach The logo of the Galeria Kaufhof department store is pictured in downtown Frankfurt, Germany. Photo: Kai Pfaffenbach
Frankfurt - Metro AG agreed to sell its Galeria Kaufhof stores to Hudson’s Bay Company for 2.83 billion euros ($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, Dusseldorf-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 labor-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.
Stock performance
Jettisoning Kaufhof may help Koch improve his company’s performance. Metro’s shares have fallen 28 percent over the past five years to about 31 euros, compared with a 143 percent increase in Germany’s 50-stock MDAX index of middle market capitalisation companies. Hudson’s Bay shares gained 5.2 percent 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 euros and earnings before interest and taxes were 193 million euros.
Kaufhof and Karstadt have dominated German department-store retailing for more than a century. The chains have struggled to adapt to new competitors including Amazon.com as shoppers seek more international brands in an increasingly crowded market.
Metro expects a positive cash inflow of about 1.6 billion euros from the sale and to “significantly reduce” its net debt by about 2.7 billion euros, the company said. The valuation of Kaufhof includes net debt.
Kaufhof will remain headquartered in Cologne, the companies said.
Bloomberg