Hudson’s Bay in joint venture with German department store giant
Hudson’s Bay Company has entered into a deal that will result in the merger of Germany’s two biggest department store chains — Galerie Kaufhof and Karstadt — and help the Canadian retail giant pay down its debt.
HBC said it has formed a joint venture with Signa Retail Holdings, a leading European retail and real estate operator whose holdings include, to form a strategic partnership for its European retail and real estate assets. Signa is paying $616 million (Canadian dollars, or $468 million) to acquire a 50.01% stake in HBC’s European retail operations, and a 50% stake in HBC’s real estate in Germany
HBC Europe’s retail operations will merge with Signa’s Karstadt Warenhaus GmbH retail chain, with HBC taking a 49.99% interest in the combined businesses. This includes two iconic banners, Galeria Kaufhof and Karstadt, as well as other HBC and Signa banners to create a well-capitalized retailer positioned for improved profitability.
The new retail company, which will be comprised of about 243 stores, will be led by Dr. Stephan Fanderl, CEO of Karstadt. HBC and Signa will share six board seats and have joint oversight of all major decisions.
HBC’s European banners include Galeria Kaufhof, the largest department store group in Germany; Belgium’s only department store group Galeria INNO; Saks Off 5th in Germany; and the Netherlands and Hudson’s Bay in the Netherlands. (Its North American banners include, Hudson’s Bay, Lord & Taylor, Saks Fifth Avenue, and Saks Off 5th, and Home Outfitters.)
“We are excited to bring together these iconic banners to create Germany’s leading retail business,” said Helena Foulkes, CEO of HBC. “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.”
In a separate transaction, affiliate Signa Prime Selection AG is acquiring a 50% stake in Hudson’s Bay’s European real estate holdings, along with Kaufhof stores in Cologne and Dusseldorf, Germany. The deal will generate proceeds of $616 million (Canadian dollars) or $469 million, for HBC.
HBC will use the proceeds to help reduce its hefty debt, which is about $4.2 billion (Canadian dollars). It is one of the biggest moves so far by Foulkes, who took the reins of HBC in and has been working to improve the company’s sagging fortunes.
“This transaction creates significant value for our shareholders, enhances our balance sheet and provides a better operating platform for our European business,” she stated. “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 that the transaction highlights the significant value of the company’s German real estate assets, which are worth approximately $1.1 billion more than what it 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,” Baker stated. “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.”
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