Hudson’s Bay, one of Canada’s most iconic department stores, recently announced that it has purchased the German Galeria Kaufhof department store chain for €2.83bn.

The acquisition includes the Kaufhof business, which operates in Germany and Belgium, and real estate in both countries.  In all it has 135 stores. The deal is expected to close by the end of September 2015. Metro will be able to use the funds gained from the €2.83bn sale to invest in e-commerce and in the modernisation of its store portfolio.

It is thought that Hudson’s plans for growing and investing in the department store chain helped it fend off competition from other bidders, including Signa Retail who owns Kaufhof’s competitor Karstadt. Galeria Kaufhof generated sales of €3.1bn last year and earnings before interest and tax of €193m.

Mintel’s Director of Retail Research, Richard Perks, provides his analysis on the deal and the impact for the wider retail market:

“This seems like an excellent solution for Kaufhof. The idea of being merged with Karstadt seemed less beneficial overall for the store and now Kaufhof, rather than being the dominant partner in an all-German group, will be a partner with Canada’s most successful department store. Metro even gets a large amount of cash as payment.

There are few department stores which have successfully developed outside their home country. In fact, with its acquisition of the Inno stores in Belgium, Kaufhof is one the few exceptions. While it is not clear just how much Hudson’s Bay will be able to benefit from the Kaufhof link, in its expansion plans it mentions creating a global platform for future growth in Europe . It seems more likely that Kaufhof should prove a good investment and any synergies will be more about sharing best practice rather than the “buying benefits” usually used to justify such deals.”

Richard Perks is Director of Retail Research at Mintel where he advises clients, writes retail reports and presents webinars. Richard joined Mintel in 1999 and previously headed the Retail team, overseeing the content and strategy of the retail reports. He regularly provides analysis to the global media on retail issues.  Before joining Mintel, Richard worked as a City analyst and as a journalist.

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