COLOGNE, Germany — Hudson’s Bay Co. (TSX:HBC) is taking another step towards becoming a global retailing company with a $3.36-billion deal to buy German department store chain Galeria Kaufhof and its Belgian subsidiary Inno.
The Toronto-based retailer— founded in 1670 as a fur trading company that opened up large portions of what’s now Canada — views the deal as a platform for further growth beyond its North American base.
Besides its own Hudson’s Bay departments stores in Canada, HBC owns the Lord & Taylor chain of department stores in the United States and as well as Saks Fifth Avenue — a globally recognized luxury retail brand acquired in 2013.
“This transaction is a significant step forward in our plans to become a premier global retailer,” HBC chief executive Jerry Storch said Monday in a statement.
“This is a strong foundation to explore additional opportunities for growth throughout the continent.”
The company estimates its eight main banners, operating in four countries, will generate about C$13 billion in revenue annually. However, much of the transaction’s value is tied to Kaufhof’s real estate, which will be transferred through a separate agreement to a U.S. partnership between HBC and Simon Property.
Under an agreement with Germany’s Metro Group, announced early Monday from Cologne, Germany, HBC will take over 103 Galeria Kaufhof stores in Germany, including 59 properties in prime inner-city locations.
HBC will also acquire 16 Sportarena stores, 16 Galeria Inno stores in Belgium, various logistics centres, warehouses and other properties, and the Galeria Kaufhof head office in Cologne.
In a side deal announced several hours later, HBC said a U.S. joint venture set up previously with Simon Property will buy at least 40 of Kaufhoff’s properties for at least $3.3 billion, subject to certain conditions.
The companies’ joint agreement says HBC has made “extensive commitments” to maintain employment levels and store count, and for Galeria Kaufhof to remain headquartered in Cologne.
Metro AG had said months ago it wanted to divest Kaufhof to focus on its Metro Cash & Carry business, the Media-Saturn consumer electronics chain and its Real hypermarket.
HBC had been challenged by a rival deal from Austrian investor Rene Banko, which owns another Germany chain called Karstadt.
“Beyond the attractive financial and transactional aspects, a key factor for us was the fact that HBC has made binding guarantees to take on the approximately 21,500 Galeria Kaufhof employees in Germany and Belgium,” said Olaf Koch, chairman of Metro’s management board.
Richard Baker, an American real estate expert who has been HBC’s governor and executive chairman since 2008, says his team has been looking for potential expansion opportunities in Europe and “have watched Galeria Kaufhof build on its exceptional real estate to become the number one department store in Germany.”