HBC deal merges German rivals
Hudson’s Bay Co. has struck a deal to merge its German department stores with its biggest rival in the European market.
The Toronto-based retailer, which owns Galeria Kaufhof, announced Tuesday an agreement with Signa Retail Holdings, the Austrian-based brand behind Karstadt, a competitor department store in the market.
HBC chief executive Helena Foulkes said the deal will earn HBC $616 million that will be funnelled into reducing debt. “It has been a tough German market and that has been true for every player in the market, so this deal allows both of us to be stronger together,” she said. “We have an opportunity to create a much better retail business.”
The deal, she added, will allow the company to turn its attention to North America, where she sees “a tremendous amount of opportunity to create real operational improvements.”
It will also involve the European arm of HBC’s Saks Off Fifth brand, Hudson’s Bay in the Netherlands, Karstadt sports stores, Signa’s Galeria INNO stores, and both companies’ food and catering businesses. It will include the creation of a 5050 real estate venture with 3.25 billion euros in assets.
HBC will nab a 49.99-per-cent interest in the combined businesses. Stephan Fanderl, Karstadt’s chief executive, will lead the new firm.
HBC’s operations in North America have come under fire in part because of outspoken stakeholder Jonathan Litt. The founder of activist investor Land & Buildings Investment Management has complained that HBC is really a real estate firm, not a retailer.
Foulkes said at the company’s annual general meeting in June that HBC was looking at selling certain properties, but was not in a hurry.
On Tuesday, she said “everything is always on the table,” but that now she is focusing on “driving the banners that we do have ... I do see a lot of opportunity to get more value out of them.”
Following news of the European deal, Litt said in a statement the $8.71 cash and implied asset value Foulkes expected confirms his feelings that HBC’s real estate value is “likely more than double that of its current share price of $10.78.”
“We urge the HBC board to remain vigilant in monetizing assets as long as the company’s shares continue to trade at a material discount to net asset value — as the shares do today — including selling HBC’s remaining interest in the European business, after synergies are realized, in the near future,” he said.