Hudson's Bay is buying Germany's leading department store chain, Kaufhof, from Metro for €2.8 billion, giving the Saks owner a launch pad to expand into Europe.
The deal, the largest German inbound M&A this year, comes as department stores start to enjoy a revival by investing in ecommerce in tandem with revamped flagship stores.
Hudson's Bay, whose shares rose as much as 13.4 per cent, said it would sell at least 40 of Kaufhof's owned or partially-owned properties to its property joint venture with Simon Property Group for at least €2.4 billion.
The company said it expected to fund the Kaufhof deal from the proceeds of the sale of the properties. Hudson Bay said it did not intend to issue equity and expected to incur limited additional debt.
Kaufhof’s 120 stores occupy prominent locations in most major towns and cities, employing 21,500 staff and making sales of €3.1 billion. It also operates 16 stores in Belgium.
Hudson’s Bay, founded in 1670, is the oldest continuously operating company in North America. The company also operates the upmarket Lord & Taylor department store chain.
Under NRDC Equity Partners chief executive Richard Baker, who is now Hudson's Bay chairman, the group went on to buy US luxury retail chain Saks Fifth Avenue in 2013 for $2.4 billion.
Hudson’s Bay now sees the Kaufhof deal, due to close at the end of September, as the next step in its plan to become a “premier global retailer”.
Hudson’s Bay also aims to expand Kaufhof’s ecommerce “aggressively” to take advantage of the role its stores can play as local distribution centres to beat online-only rivals, a strategy dubbed “omnichannel” shopping in retail jargon.
The deal is a rare move by a foreign retailer into Germany, a country seen as too risky since Wal-Mart was forced to retreat in 2006, but one with consumer sentiment now at its highest since 2001.
