Hudson's Bay Co. has a $3.9-billion (Canadian) deal – including pension liabilities – to buy German department store chain Galeria Kaufhof, industry sources say.
Toronto-based Hudson's Bay, which has been in talks for weeks with Metro AG, the parent of Kaufhof, is expected to announce the purchase as early as Monday. Hudson's Bay was drawn to the German company both for its retailing name in that country and for its prized real estate.
Richard Baker, executive chairman of Hudson's Bay and a U.S. real estate magnate, is believed to be attracted to the value of Kaufhof's 135 stores, which are housed in key real estate properties in Germany and Belgium. Mr. Baker could not be reached for comment.
Mr. Baker has said that he is looking for international expansion opportunities. In late 2013, Hudson's Bay acquired Saks Inc. for $2.4-billion (U.S.). It will open its first Saks Fifth Avenue stores in Canada next year.
In the latest talks, Hudson's Bay beat Vienna-based Signal Retail, owned by Austrian developer Rene Benko, who also owns Kaufhof rival Karstadt, sources say.
Hudson's Bay is believed to have had a better blueprint for growth and investment, without plans for job losses, they say. The Benko offer intended to combine Kaufhof and Karstadt, leading to inevitable job losses, they say. Hudson's Bay wants to keep management intact, they say.
Kaufhof generated sales last year of €3.1-billion ($4.3-billion Canadian) and profit before interest and taxes of €193-million.
Mr. Baker has shown his real estate savvy in a string of deals tied to Hudson's Bay. In February, the retailer said it was teaming with two real estate giants – one in Canada and one in the United States – to create new companies valued at $4.2-billion (Canadian), paving the way to take them public or for some other deal.
In 2011, three years after acquiring Hudson's Bay, Mr. Baker sold most of the company's Zellers leases to U.S. rival Target Corp. for $1.8-billion – more than the roughly $1.1-billion HBC purchase price.
Last year, HBC sold its flagship Toronto Queen Street store and office building to Cadillac Fairview Corp. for $650-million.
Also in 2014, Hudson's Bay revealed that its iconic Manhattan Saks Fifth Avenue store was valued at $3.7-billion (U.S.), according to an independent appraisal, which is more than its $2.4-billion purchase price of the entire Saks chain about a year earlier.