Hudson’s Bay to buy German department store

London - Hudson’s Bay, the owner of US retailer Saks Fifth Avenue, is buying Germany’s biggest department store chain, Galeria Kaufhof for 2.82 billion euros including certain liabilities, according to a statement from Metro, the current owner of Kaufhof.

Toronto-based Hudson’s Bay, which operates its namesake department store in Canada as well as the Lord & Taylor and Saks chains in America, has been in talks to buy the 135-year-old Galeria Kaufhof for months, and finally acquired the retail group after reportedly winning a bidding war with Austria’s Signa Holding, which owns Kaufhof’s German competitor, Karstadt.

The sale includes the operational department store business in Germany and Galeria Inno in Belgium, as well as the correspondingly owned real-estate portfolio, Metro said.

Richard Baker, HBC's governor and executive chairman, said: "This is an exciting transaction that demonstrates our proven growth formula in action, and it is the right investment and the right time.

“We have been carefully surveying the European retail landscape for many years for a potential expansion opportunity and have watched Galeria Kaufhof build on its exceptional real estate to become the #1 department store in Germany.

Hudson’s Bay said it would finance the acquisition by selling Kaufhof’s stake in at least 40 properties to its US real estate joint venture with Simon Property Group.

By adding Galeria Kaufhof to its portfolio HBC will operate 464 stores under eight banners, including Hudson's Bay, Lord & Taylor, Saks Fifth Avenue, Saks OFF 5TH and Home Outfitters, with Germany and Belgium generating 33 percent of its sales, ahead of the 23 percent it makes in its homeland Canada, but still less than the 44 percent of sales generated in the United States.

HBC acquires Germany’s biggest department store Galeria Kaufhof

Commenting on the deal, Olaf Koch, chairman of Metro’s management board, said: "With Hudson's Bay Company, we have found the ideal partner for a successful future of Galeria Kaufhof. HBC pursues a strategy of international growth and Galeria Kaufhof plays a central role in this expansion.

“Beyond the attractive financial and transactional aspects, a key factor for us was the fact that HBC has made binding guarantees to take on the approximately 21,500 Galeria Kaufhof employees in Germany and Belgium.”

Galeria Kaufhof's existing management team is expected to remain in place following the close of the transaction, which is expected at the end of September, and in a statement Metro confirmed that they will work closely with HBC's leadership to explore opportunities to further strengthen Kaufhof's offerings to consumers, which could include introducing the Saks Fifth Avenue and the Saks OFF 5TH banners in Germany and Belgium.

Jerry Storch, CEO of HBC, added: "This transaction is a significant step forward in our plans to become a premier global retailer. We look forward to working with Galeria Kaufhof's management team as we bring together two geographically complementary businesses, diversifying HBC's revenue base with leading banners in Canada, the United States, Germany and Belgium. This is a strong foundation to explore additional opportunities for growth throughout the Continent."

Images: Galeria Kaufhof