Tycoon moves closer to Karstadt takeover

German department store chain Karstadt is set to emerge from insolvency after investor Nicolas Berggruen struck a deal with the retailer’s biggest landlord and a court approved the restructuring plan.

The agreements pave the way for Mr Berggruen to take over the chain at the end of this month, Karstadt’s administrator said, seemingly ending a complex 15-month process to find a buyer for one of Europe’s best-known retail names.

Mr Berggruen emerged in June as Karstadt’s likely future owner when a committee of the retailers’ creditors approved his bid. But a deal was held up by his failure to reach agreement with Highstreet, a consortium led by Goldman Sachs that owns most of Karstadt’s 120 stores.

Mr Berggruen on Friday appeared at the group’s flagship Berlin store to announce a deal to staff alongside trade union representatives and Ursula von der Leyen, Germany’s labour minister. Some 25,000 jobs would have been at risk if Karstadt had been shut down.

“The company needs to renew and refresh itself and give something to customers,” said Mr Berggruen, who has pledged to retain all staff.

Highstreet, which also includes property funds run by Deutsche Bank and Generali, reached agreement with its investors on Thursday to strike a rental deal with Mr Berggruen and said it “had done more than any other creditor to permit a solid new start” for Karstadt.

“Mr Berggruen now has a duty to put capital and resources in and show how his plan for Karstadt can be achieved,” said Highstreet. The consortium has Maurizio Borletti, the Italian retail entrepreneur, among its investors, and was also in the running to buy Karstadt. Mr Borletti also put forward a late lone offer.

Highstreet’s statement reflects concern that Karstadt’s long-term future remains far from assured in spite of significant rent reductions. The department store group had some €4bn ($5.2bn) of annual sales before its insolvency but was losing ground as shoppers’ tastes veered towards a mix of specialist stores and discount retailers.

Galeria Kaufhof, which is the rival to Karstadt on virtually every German city high street, has remained profitable but is also up for sale by parent Metro, the retail group.

Mr Berggruen, a US-based investor with German roots, has little experience as a retail entrepreneur. He has said he would bring in BCBG Max Azria, a US fashion group, to play a part in reshaping Karstadt.

Karstadt was owned by Arcandor, also owner of the Quelle mail order business and part of Thomas Cook, the travel group. It has been run by an administrator for more than a year since Arcandor filed for insolvency, while Quelle has been shut down.