Austrian investor Benko buys Karstadt

Reuters

Berlin

German department store giant Karstadt is changing hands for the second time in four years, with Austrian property investor Rene Benko set to overhaul the loss-making chain.

A familiar sight in German cities and the owner of the famous KaDeWe luxury department store in Berlin, Karstadt competes with Kaufhof, which has capitalised on Karstadt’s woes to gain market share. The two run around 100 stores each.

Signa will now try to keep Karstadt out of the media limelight in order to focus fully on its restructuring, Wolfram Keil, managing director of Signa Retail, said.

“The most important goal now is to achieve calm and to present, discuss with labour representatives, approve and implement the next steps of a sustainable restructuring strategy,” he said in a statement yesterday.

He did not provide any details about what form the restructuring would take and Signa was not immediately available for comment yesterday, a public holiday in Austria.

Signa Holding, Benko’s property vehicle, last year bought a majority stake in Karstadt’s luxury and sports-focused stores from US investor Nicolas Berggruen. It said on Friday it was taking over the remaining minority stake.

Signa is also taking control of a further 83 Karstadt department stores that are bundled together in a separate company, exercising a call option to take over 100% of the stores for a symbolic €1 ($1.34).

The revised option allows a full takeover, Signa said, and would mean Berggruen’s exit from Karstadt. Signa had previously agreed an option that would allow it to take over 75% of Karstadt, sources had told Reuters.

Signa said that no further money would be paid to Berggruen as part of the deal.

Berggruen, the son of an international art dealer who has a net worth of $1.9bn according to Forbes, rescued Karstadt from insolvency in 2010 but has come under fire from unions after failing to invest and turn around the chain.

In July, Karstadt’s chief executive Eva-Lotta Sjostedt stepped down after only five months in the job, hinting at a lack of support from Berggruen.

“Despite all of our efforts, Karstadt is still not reporting a profit. We are therefore making way so that Karstadt can have a fresh start with a new owner.” Berggruen said in a statement.

A source close to him said that Berggruen felt it was not only money that was necessary but restructuring and consolidation within the sector.

There has long been speculation that Karstadt and Kaufhof could merge, but German retail group Metro, which owns Kaufhof, has always rejected such a move. Benko previously tried to buy Kaufhof, but Metro dismissed the bid as too low.

Shares in Metro rose 1.3% on Friday, outperforming a 0.5% rise on the German index for medium-sized companies.

Privately-held Karstadt doesn’t report financial results. It saw sales fall 3.9% and made a net loss of 34mn euros in the first half of its 2013/2014 fiscal year, German business newspaper Handelsblatt reported in May.

Kaufhof, on the other hand, reported a 0.5% rise in sales in Germany in the first nine months of its 2013/14 fiscal year.