Vienna's Signa withdraws €3bn Kaufhof offer after Canadian Hudsons Bay rejection

© OLIVER BERG / DPA

Just two days after appointing a new CEO, Canadian retailer Hudsons Bay this week announced its rejection of an unsolicited offer for German store chain Kaufhof by Vienna-based Signa Holding. The offer, reported to be worth €3bn, has been withdrawn.

"After a careful review and consideration conducted in consultation with our financial and legal advisors .. its Board of Directors unanimously rejected the unsolicited proposal to acquire the company's German business and related real estate assets," a Hudson's Bay Company release said. "Additionally, Signa Holding GmbH has withdrawn its offer, thus concluding discussions."

Signa, founded and still headed by controversial real estate entrepreneur René Benko, confirmed its bid late last year but gave no details. Reports suggested the offer was about €3bn, based mostly on Kaufhof property values.

HBC in 2015 bought Galeria Kaufhof’s 103 department stores, 16 SportsArena stores in Germany, plus 16 Galeria Inno locations across Belgium, for an enterprise value of €2.42bn. It then sold 41 of Kaufhof's 59 properties into a joint venture with giant US REIT Simon Property for the same amount. The move was done at a time when bricks and mortar retailers still thought that the impact of Amazon and other e-tailers on market share could be contained.

Changes have also taken place in HBC leadership in the interim. Richard Baker, CEO during the acquisition, has moved up to be HBC governor. The firm, which has twin headquarters in Toronto and New York, announced on Monday that it appointed Helena Foulkes, former executive of CVS Health, as his successor as chief executive.

Baker commented: "Our European business and related real estate assets represent critical components of our long-term strategy and we continue to have a high degree of confidence in our ability to drive results across our iconic retail banners. Our diverse European real estate holdings add significant value to our global real estate assets and we remain committed to creating opportunities to improve the productivity of our portfolio." The interest in Kaufhof and its real estate assets validates HBC's own view of the considerable underlying value, he said.

David Leith, HBC director, said Signa's proposal, "significantly undervalues our German business and related real estate assets and is not supported by sufficient certainty of financing to warrant further consideration at this time."

Signa already owns 79 Karstadt department stores, the sole chain of any size in Germany that still offers competition to Kaufhof. Specialists see the main value in many of the stores lying in their central urban locations, where change of use - at least for upper floors, perhaps for flexible office space or even residential - could significantly enhance asset values.

BIE COMMENT: According to German business magazine Wirtschaftswoche, Karstadt was suspected of being the source of speculation that HBC has been unable to make payments on a loan against Kaufhof stores made by Stuttgart savings bank Landesbank Baden-Württemburg. But neither side has commented officially on this aspect. HBC, whose share price has underperformed significantly in recent years, has come under strong shareholder pressure to divest international holdings. Clearly HBC did not wish to make a decision prior to an assessment by its incoming CEO. If she cannot develop a long-term plan it may mean the matter is far from closed.

Business Immo