Deadline ends: Is there a buyer for Galeria Karstadt Kaufhof?

Purchase offers for the insolvent department store group Galeria Karstadt Kaufhof can still be submitted today. Whatever the outcome: branch closures and job cuts are to be expected.

A department store chain with 92 branches, mostly in central locations, 15,500 employees and head office in Essen is up for sale. Purchase offers for Galeria Karstadt Kaufhof can still be submitted to the insolvency administrator to this day.

Even though there have recently been three bankruptcies within four years, according to insolvency administrator Stefan Denkhaus, there are possible buyers for the department stores. Denkhaus reported corresponding inquiries as early as mid-January.

Those close to the company say that a low double-digit number of initially non-binding offers have been received. This has not been confirmed.

Denkhaus did not want to give specific names as to who was among the interested buyers. In interviews, however, he let it be known that there were offers from home and abroad, from other trading companies, but also from financial investors. “This is the basis of my optimism,” said the insolvency administrator. “And if I wasn’t an optimist per se, I would have chosen the wrong career.”

speculation about Billionaire family from Thailand

One name that kept coming up was that of the Thai billionaire family Chirathivat from Bangkok. It owns the Central Group, a conglomerate with hotels, restaurants and around 120 department stores, including 16 luxury department stores. Former Galeria Karstadt Kaufhof investor René Benko was their most important trading partner in Europe.

With 50.1 percent, the Central Group is already the majority owner of Signa Premium and thus of German luxury department stores such as the KaDeWe in Berlin, the Alsterhaus in Hamburg and the Oberpollinger in Munich.

In an internal letter to employees three weeks ago, Denkhaus said it was satisfied with the offers. The next phase is now about binding offers. More intensive negotiations are already underway with a few bidders.

“We are now fully concentrating on discussions with interested parties who want to acquire Galeria as a whole and profitable company,” Denkhaus assured the employees. “All other offers from investors who only want to take over individual houses or a smaller number of locations are currently on the back burner.”

Problem of excessive rents

This is the exciting question for the thousands of employees: When a new investor and owner comes – how many locations does he take over? In recent years, large department stores in particular have had to struggle with purchasing reluctance and competition from online retailers. According to the Federal Statistical Office, department stores and department stores have lost a third of their price-adjusted sales over the past 20 years. In the same period, sales in mail order and online retail increased by 170.1 percent in real terms.

At Galeria Karstadt Kaufhof, 60 of the 92 branches are currently profitable, says Galeria boss Olivier van den Bossche. Another 16 could be profitable if the rents weren’t so high. Van den Bossche pointed this out right at the start of the bankruptcy: “We have many, many branches that are doing very well economically. And we also know that if we have a reasonable rent, the department store in Germany has a very good future.”

According to Bossche, a rent amount of seven to twelve percent of sales can be achieved. In some cases, however, rents of up to 30 percent had to be paid. That is too much for the department stores.

Therefore, parallel to the bidding process, negotiations also took place with landlords: with operators of shopping centers or real estate funds, for example, in order to reduce the rent burden. Whether the landlords are willing to do this again, after the three bankruptcies that have already taken place, including debt waivers – will also ultimately depend on how many department stores are closed this time. Numerous properties belonged to the insolvent Signa Group, which obviously charged excessive rents.

Decision by mid-April?

There have been closures and job cuts at department stores for years. Since 2020 alone, around 80 houses have been abandoned and several thousand jobs have been cut. And despite interested buyers, job cuts are likely this time too.

This was already mentioned in Denkhaus’ letter to the workforce at the end of February: “Depending on the negotiations with the landlords, we must also expect branch closures in this insolvency process. Furthermore, according to the current planning status, there will be extensive restructuring and staff reduction measures in the service center. ” In other words: at the company headquarters in Essen.

The new social plan negotiations should be completed by the end of March. At the beginning of mid-April, company circles say, the new owner of Germany’s last department store chain could be determined.

Several Investigation process

At the same time, investigations are underway into the bankruptcy of Benko’s Signa Group, which also included Galeria Karstadt Kaufhof. The Munich public prosecutor’s office is investigating suspected money laundering. Benko’s Signa Group is said to have deceived banks by providing inflated information about future rental income in order to obtain higher loans and better conditions.

In addition, the economic crime department of the Bochum public prosecutor’s office has been investigating those responsible at Galeria Karstadt Kaufhof and two other people since the end of February on suspicion of breach of trust and other crimes. After WDRAccording to research, rent payments to Signa increased from 15.8 million euros to 19.5 million euros per year between 2019 and 2022, despite the department store group going bankrupt twice. The rental charges were sometimes more than 30 percent of sales – around ten percent is usual in the market.

With information from Jörg Marksteiner, WDR, and Alina Leimbach, ARD financial editorial team