Hudson’s Bay Company to Join HBC Europe with Germany’s Karstadt

September 12, 2018

The transaction combines two iconic banners to create Germany’s leading retailer with annual revenue in excess of €5 billion, and creates a 50-50 real estate joint venture valued at €3.25 billion.

On September 11, Willkie client Hudson’s Bay Company (TSX:HBC) announced it entered into definitive agreements with SIGNA Retail Holdings, a leading European retail and real estate operator, to form a strategic partnership for its European retail and real estate assets. The transaction combines two iconic banners to create Germany’s leading retailer with annual revenue in excess of €5 billion.

Pursuant to the agreement, HBC Europe’s retail operations will merge with SIGNA’s Karstadt Warenhaus GmbH, with HBC taking a 49.99% interest in the combined businesses. This includes two iconic banners, Galeria Kaufhof and Karstadt, as well as other HBC and SIGNA banners to create a well-capitalized retailer positioned for improved profitability. The new retail company will be led by Dr. Stephan Fanderl, CEO of Karstadt and an experienced German retail operator. HBC and SIGNA will share six board seats and have joint oversight of all major decisions.

SIGNA will acquire a 50% interest in HBC’s German real estate assets from HBC and its real estate joint venture partners, and a 50-50 real estate joint venture will be formed with SIGNA to own and manage HBC’s German real estate assets. These transactions will generate net proceeds of €411 million, and value the German real estate assets at a total of €3.25 billion.

This complex, multi-layered corporate/real estate joint venture transaction crossed multiple borders including Canada, US, Germany, Austria, The Netherlands and Belgium.

HBC is a diversified global retailer focused on driving the performance of high-quality stores and their omnichannel platforms and unlocking the value of real estate holdings. Founded in 1670, HBC is the oldest company in North America. HBC's portfolio today includes formats ranging from luxury to premium department stores to off price fashion shopping destinations, with more than 480 stores and approximately 65,000 employees around the world.

In 2015, Willkie represented HBC in its acquisition of the German department store chain Galeria Kaufhof, Galeria Inno (Belgium’s only department store) and the Sportarena brand from Düsseldorf-based Metro AG for an enterprise value of €2.8 billion. Additionally, last year the firm assisted HBC in a series of strategic transactions with WeWork Companies, Rhône Capital and an affiliate of WeWork Property Advisors (WeWork Property Advisors), a joint venture between WeWork and Rhône, creating a multi-faceted strategic relationship designed to maximize the productivity and value of HBC’s global real estate assets and position HBC at the forefront of experiential retailing.

The cross-border, multidisciplinary Willkie deal team on the current transaction was led by partners Gordon Caplan, Georg Linde and Michael Brandt.