Richard Baker’s Firm, Bernd Beetz Seal Deal to Purchase Germany’s Galeria
The agreement lifts Galeria out of bankruptcy and will set a new store count for the retailer as leases get renegotiated.
NRDC Equity Partners and BB Kapital SA confirmed Wednesday that they are acquiring Galeria Karstadt Kaufhof, the department store business in Germany also known as Galeria.
The purchase price for the deal, which lifts Galeria out of bankruptcy, was not disclosed.
NRDC Equity Partners is the private investment firm operated by Richard
Baker, his son Jack, and Lucas Evans. Richard Baker is chief executive officer and governor of HBC, which is separate and unrelated to NRDC Equity Partners. NRDC invests in retail, real estate and consumer brands. The principals control more than 50 million square feet of real estate.
BB Kapital is the family office of Bernd Beetz, the former CEO of beauty group Coty Inc.
The announcement on Wednesday confirmed WWD reports on April 6 and 9.
The takeover of Galeria by NRDC
Equity Partners and BB Kapital is part of an insolvency plan. The insolvency administrator of Galeria, lawyer Stefan Denkhaus of the firm Boege Rohde Luebbehuesen, intends to submit the plan to the Essen District Court at the end of April. The creditors are expected to vote on it in late May. Galeria is based in Essen, Germany.
As part of the deal structure emerging from the bankruptcy, Denkhaus will retain company oversight, most likely until the end of July when full control of the company transfers to NRDC Equity Partners and BB Kapital, with Beetz designated as executive chairman of Galeria. The agreement stipulates that the German American investor consortium receives Galeria "as a whole" and is expected to take over more than 70 stores across Germany, reflecting some downsizing in the business. Galeria currently operates 90 stores in Germany, generating 2.2 billion euros in sales annually.
The precise number of stores that the new owners will operate remains to be seen as many rental agreements are still being negotiated by the insolvency administrator and Galeria management. The shops being retained will be determined at the end of April, and the company's head office "will also be adjusted to reflect the reduced size of department stores, with the aim of managing Galeria like a medium-sized company," the new owners indicated. Maintaining the stores' local focus is a priority, they noted.
"We are acquiring Galeria because we believe that a traditional department store has a reason to exist in the German market," Jack Baker, the founding partner of NRDC Equity Partners, told WWD, through an email exchange. "Furthermore, we believe that NRDC Equity Partners, along with our partner, Bernd Beetz, and the broader management team have a compelling plan to ensure the success of the business long term.
“Structurally, we believe that through constructive conversations with landlords there is a path to correct the oversize rent burden that has plagued the business for years," Baker added. "By doing so, the business will generate the additional cash needed to reinvest in itself to remain competitive in the future. Galeria is more than just a department store; it is an iconic brand in the shared experience of all Germans who deserve owners ready to operate it as a whole."
Asked about the opportunities for Galeria, Evans, NRDC's managing partner, said, "Operationally, we believe there is an opportunity for the business to extend its advantage in key categories where it currently boasts significant market share, including beauty and fragrance, handbags and accessories, shoes and intimates. We also believe that the formation and strengthening of strategic partnerships across new and existing categories, such as food, electronics, home furnishings and toys, represent a meaningful growth opportunity for the business."
Evans added that along with Baker,
"We are fully supportive of existing management and their go-forward strategic plan. Our role is to assist Mr. Beetz and the leadership team in their execution of the strategy which we are confident will yield positive results for the business."
"We are extremely glad that we found unanimous support for our long-term plan,” Beetz said. "We believe in the future of Galeria, and we have only one focus: invest, develop and grow the department stores. The next few weeks are crucial to establishing the prerequisites for a sound business case in place. Once these requirements are achieved, we are confident we will turn around Galeria and set it on a successful course.”
In his statement, Denkhaus said, "We have been negotiating intensively with two potential investors, and, together with the creditors' committee, we have selected two investment firms, BB Kapital SA and NRDC Equity Partners. The consortium convinced us with its entrepreneurial courage, a sustainable economic concept and proven financial solidity.”
Galeria revealed its insolvency in
January following an effort to restructure its business and commitments in the wake of the financial collapse of its Austrian parent Signa, headed by René Benko. Galeria is the result of the January 2020 merger of the Kaufhof and Karstadt department store chains in Germany.
“Three months ago, we set in motion a plan to secure the future of Galeria Karstadt Kaufhof by filing for insolvency proceedings,” said Olivier van den
Bossche, CEO of Galeria. "The aim was to achieve a disengagement from the old structure through a change of ownership. We wanted to keep Galeria as a whole competitive and continue the strategy of consistent local orientation. Today, we are decisively closer to this goal. This is the natural next step to protect and extend the future of Galeria."
In their statement the new Galeria owners credited Beetz, a former Galeria supervisory board member, with having extensive knowledge of the German landscape, the retail industry, and Galeria. They also noted that during his leadership of Coty the cosmetic firm's revenues almost quadrupled from $1.3 billion to $4.7 billion. Before Coty, Beetz was responsible for the Christian Dior fashion perfume and cosmetics division worldwide at LVMH Moët Hennessy Louis Vuitton. Earlier, he spent 20 years in various management positions at Procter & Gamble in Germany, Switzerland, Italy and Turkey.
BB Kapital, based in Lugano, was founded in 2012 as a private asset management company by Beetz after the initial public offering of Coty Inc. BB Kapital focuses on the luxury and consumer goods segment, including investments in the fashion, beverages and delicatessen, accessories, perfume and cosmetics sectors, as well as real estate and sports segments.
Richard Baker, through HBC, is said to be close to a deal to acquire the Neiman Marcus Group. The owners of the two retail companies have been negotiating for a long time.
HBC is the majority owner of Saks, the luxury e-commerce site; The Bay e-commerce marketplace in Canada, and Saks Off 5th, the upscale off-price e-commerce company. HBC also wholly owns the Hudson's Bay, the operating company for Hudson's Bay's brick-andmortar stores in Canada, as well as SFA, which operates Saks Fifth Avenue stores, and O5, which operates the Saks Off 5th stores.
In the Galeria deal, NRDC Equity Partners was advised by Robert Rizzo, Britta Grauke, and Christian Tappeiner at Weil, Gotshal & Manges LLP's New
York and Frankfurt offices. BB Kapital was advised by Dr. Matthias Lupp and Dr. Stefan Jörgens of Lupp + Partner.