Aug 18, 2014
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Austrian investor takes on Germany's Karstadt stores

Aug 18, 2014

Struggling German department store chain Karstadt is changing hands for the second time in four years, with an Austrian property investor taking over the chain from U.S. investor Nicolas Berggruen.

A familiar site 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.

| Source AFP

Signa Holding, the property vehicle of Austrian investor Rene Benko, already owned a majority stake in Karstadt's luxury and sports-focused stores. It said on Friday it was taking over the remaining minority stake in those stores.

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 percent of the stores.

Signa had previously agreed an option that would allow it to take over 75 percent of Karstadt for a symbolic 1 euro ($1.34), sources had told Reuters. The revised option allows a full takeover, Signa said.

Signa said on Friday 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 $1.9 billion 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 stepped down after only five months in the job, hinting at a lack of support from Berggruen.

Signa said on Friday that it had already invested hundreds of millions in loss-making Karstadt over the last few months in order to provide it with liquidity and gave it a guarantee enabling it to extend credit insurance.

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 in a statement.

Trade union Verdi said it appreciated the fact Signa had put up the guarantee for the credit insurance, but that Benko must come up with a new strategy for the group as soon as possible.

"The new owner must provide the necessary funds so that Karstadt can survive," Verdi board member Stefanie Nutzenberger said.

The deal could revive speculation that Karstadt and Kaufhof will seek to merge. But German retail group Metro, which owns Kaufhof, has always rejected such a move. Benko has previously tried to buy Kaufhof, but Metro dismissed the bid as too low.

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

Karstadt made a net loss of 34 million euros in the first half of its 2013/2014 fiscal year, German business newspaper Handelsblatt reported in May. (1 US dollar = 0.7470 euros)

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