HBC merges its European business with Signa’s Karstadt

Hudson’s Bay Company (HBC) has entered into definitive agreements with Signa Retail Holdings, to form a strategic partnership for its European retail and real estate assets. The development would see HBC Europe's retail operations merge with Signa's Karstadt Warenhaus GmbH, with HBC taking a 49.99 percent interest in the combined businesses. This, the company said, includes Galeria Kaufhof and Karstadt, as well as other HBC and Signa banners to create a well-capitalized retailer positioned for improved profitability.

"We are excited to bring together these iconic banners to create Germany's leading retail business," said Helena Foulkes, HBC's Chief Executive Officer in a statement, adding, "We are creating a stronger retail entity that is better positioned to capitalize on market opportunities. This transaction builds on our recent efforts to streamline HBC and provides a clear path forward to improve our European operations."

HBC merges it European business with Signa’s Karstadt

Together, the company added, these businesses generated approximately 5.4 billion euros in total sales during fiscal 2017. The new retail company will be led by Dr. Stephan Fanderl, CEO of Karstadt and an experienced German retail operator, while HBC and Signa will share six board seats and have joint oversight of all major decisions.

"This transaction creates significant value for our shareholders, enhances our balance sheet and provides a better operating platform for our European business. The creation of a stronger operator in Europe allows us to focus our attention on our North American banners, helping to ensure we are making the right strategic decisions to drive performance and profitability within those businesses," added Foulkes.

Through the said transaction, Signa will acquire a 50 percent interest in HBC's German real estate assets from HBC and its partners, and a 50-50 joint venture will be formed to own and manage HBC's German real estate assets. These transactions will generate net proceeds to HBC of 411 million euros (616 million dollars), and value the German real estate assets at a total of 3.25 billion euros (4.88 billion dollars) compared to the total Galeria Kaufhof purchase price of 2.51 billion euros (3.77 billion dollars) in 20151. The net proceeds, together with the implied value of HBC's remaining interest in these real estate assets, net of debt, totals 8.71 dollars per share.

"This transaction highlights the significant value of our German real estate assets, which are worth approximately 1.1 billion dollars more than what we paid for Galeria Kaufhof in 2015. Our partnership with Signa will serve our business extremely well as it establishes a platform to further strengthen our European retail and real estate operations,” said Richard Baker, HBC's Governor and Executive Chairman.

Picture:Facebook/Galeria Kaufhof