Merger of Karstadt and Kaufhof is becoming more and more serious

Author: Osman Cetinkaya
Date: 06.07.2018

Previous takeover attempts always failed

There are news of Karstadt and Kaufhof in terms of merging. The Canadian Kaufhof owner Hudson’s Bay Company (HBC) and the Austrian Karstadt owner René Benko have signed a letter of intent on Tuesday.

The letter of intent should state that Kaufhof, Karstadt and Karstadt Sport will be incorporated into a joint venture. These plans were confirmed to the German Press Agency on Wednesday.

The statement should be titled “Agreement on a merger among equals in the European department store business”. More than half of the shares could go to Benko’s company Signa, which could then lead the operating business.

The question what the merger would mean for the employees of both chains is not yet clarified. According to sources involved in the negotiations, the areas of administration and purchasing should be merged and jobs be cut.

However, a surge of branch closures is not an option. Only 15 branches, which do not work well, are ready for disposition. Hudson’s Bay shall receive 1.1 billion euros from Signa. In addition, the debts amounting to 750 million euros will be taken over by Signa. However, there has not been an official statement from Hudson’s Bay or Signa yet.

Only last week it became known that the owners of the two shopping chains are talking about possible cooperation. Karstadt owner Benko has been considering taking over the company Kaufhof and founding the “Deutsche Warenhaus AG” through the merger for some years.

However, all attempts to take over in recent years have failed. Only a few months ago Signa made HBC an offer to buy Kaufhof, but the offer and the related real estate package were rejected.

Department stores have suffered from competitors such as the low-priced Primark or online retailers Amazon and Zalando for years. Management mistakes made the situation even worse.

Especially for Kaufhof things are currently far from good. Since the takeover by the Canadians, the Cologne trading company has constantly struggled with red numbers and sales declines. Roland Neuwald, Kaufhof boss, is currently negotiating with the Verdi union for a restructuring agreement in order to get the company’s costs back on track.

Especially for Kaufhof things are currently far from good. Since the takeover by the Canadians, the Cologne trading company has constantly struggled with red numbers and sales declines. Roland Neuwald, Kaufhof boss, is currently negotiating with the Verdi union for a restructuring agreement in order to get the company’s costs back on track.