Signa takeover of Karstadt crown jewels may not prevent breakup

German-American billionaire Nicolas Berggruen, who rode into town in 2010 to save Germany’s Karstadt department store chain from imminent bankruptcy, has sold the chain’s most prestigious outlets to Austrian group Signa Holding, controlled by controversial entrepreneur Rene Benko.

Signa has bought a 75.1% stake in Karstadt Premium and Karstadt Sports for €300m, with Berggruen Holdings retaining 24.9% in both firms along with 100% of the core Karstadt business, consisting of a further 83 stores. The €300m for the Signa stake will be re-invested in the modernisation of these stores.

Three of the most high-profile Karstadt addresses – KaDeWe in Berlin, the Alsterhaus in Hamburg and Oberpollinger on Munich’s premier shopping street - are part of Karstadt Premium, while Karstadt Sports has 28 specialised outlets in prime big-city shopping districts.

Berggruen has been the subject of vocal criticism in recent months that not enough was being reinvested in the Karstadt stores to halt the inexorable slide in market share that Germany’s leading department stores have been experiencing for years. Several analysts have already voiced their opinion that the €300m will not be near enough to the estimated €500 per square sales metre investment required to fundamentally save the stores.

Dissent among Karstadt staff has been mounting for months, with a new series of talks between management and unions about pay and staffing levels due to kick off at the end of September. Karstadt still has 20,000 staff despite a wave of layoffs after Berggruen’s arrival and insiders describe the internal climate at the department store chain as ‘distrustful’.

Combined with previous purchases of Karstadt property assets over the past two years, now totalling 20 properties at a cost of about €1.5bn, Signa is now Karstadt’s largest landlord. According to Signa’s managing director Christoph Stadlhuber, “The takeover of the Karstadt Premium and the Karstadt Sports businesses boosts Signa to one of the leading companies for inner city retailing in top locations in Germany. The whole Karstadt Group will benefit from our investment and the ongoing successful path ‘Karstadt 2015’ will be further fuelled and can be executed.” 


Signa was the leading bidder in the auction for the Kaufhof department store chain from its owner Metro AG, in which Berggruen was also an underbidder, before Metro cancelled the sale earlier this year citing an inacceptable level of offers from bidders. Signa, with €5.5bn of assets under management, is controlled by Benko, with a 49% stake being held by Greek shipping family Economou. Stadlhuber recently replaced his boss Benko as managing director at Signa, while Benko’s lawyers haggle with the Viennese justice authorities about the confirmation of a suspended sentence for Benko in relation to bribery charges.