The German department store Karstadt has been saved from insolvency following months of uncertainty. Billionaire Nicolas Berggruen has finalized a takeover and lower rent for the stores.
The thousands of Karstadt workers will keep their jobs
The 25,000 employees of the Karstadt chain of department stores have had their jobs secured, after months of uncertainty about the future of the retailer.
Following 15 months of discussions, all the necessary signatures have been collected on an acquisition deal for Germany's largest department store chain.
Karstadt was acquired by billionaire Nicholas Berggruen in June, and he has been working over the past months to secure Karstadt's creditors, which include Valovis Bank and the Highstreet real-estate consortium led by the Goldman Sachs Group.
Berggruen had been given the deadline of September 2 by the insolvency court in Essen to get the creditors on board.
German Minister for Labor and Social Affairs Ursula von der Leyen has welcomed the rescued of Karstadt, but at the same time warned of complacency.
"This is a good day for Karstadt, but it is not out of the woods yet. With Nicolas Berggruen there’s an honest chance of getting the enterprise going again," she said in Berlin on Friday.
Conditions of the deal
For the past months, Berggruen has been haggling with the creditors over rent, urging them to lower their prices. This was the key sticking point between the new owner and the creditors.
Billionaire Nicolas Berggruen has pledged to save jobs
In a press conference in Berlin, Highstreet claimed that "more than any other creditor" they have made a new start for Karstadt possible. Highstreet said they have made "enormous concessions" to Berggruen and now said the onus was on him to make sure Karstadt succeeds.
"Mr. Berggruen needs to prove to us with his use of capital and resources just how successful his plan for Karstadt is," a statement from the landlord said.
The US-German billionaire Berggruen won the bidding for Karstadt in June, edging out two other offers. He has promised not to cut jobs at Karstadt nor close any of its 120 stores.
Some describe Berggruen, 49, as somewhat of an atypical entrepreneur. He usually sports a tree-day beard and believes the rich, himself included, should pay more tax.
He was born in Paris, studied finance in New York, and by 1986 had founded Berggruen Holdings, which would go on to become a global corporate and real estate investor.
In the summer of 2009, Karstadt filed for insolvency when parent company Arcandor went under, leading to Berggruen's interest in the firm.
Karstadt is an iconic retailer which can be found in most shopping districts across Germany. The first store opened in 1881 and its flagship West German store - Kaufhaus des Westens, or KaDeWe - was an icon of capitalism in the Cold War.
Author: Darren Mara, Catherine Bolsover (AFP/Reuters/dpa)
Editor: Sean Sinico