Solomon Partners Advising HBC

On Agreement to Merge HBC Europe with Germany’s Karstadt

HBC announced it entered into definitive agreements with SIGNA Retail Holdings (“SIGNA”), a leading European retail and real estate operator, to form a strategic partnership for its European retail and real estate assets.

HBC Europe’s retail operations will merge with SIGNA’s Karstadt Warenhaus GmbH, with HBC taking a 49.99% interest in the combined businesses. This includes two iconic banners, Galeria Kaufhof and Karstadt, as well as other HBC and SIGNA banners to create a well-capitalized retailer positioned for improved profitability. Together, these businesses generated approximately €5.4 billion in total sales during fiscal 2017. The new retail company will be led by Dr. Stephan Fanderl, CEO of Karstadt and an experienced German retail operator. HBC and SIGNA will share six board seats and have joint oversight of all major decisions.

SIGNA will acquire a 50% interest in HBC’s German real estate assets from HBC and its partners, and a 50-50 joint venture will be formed to own and manage HBC’s German real estate assets. These transactions will generate net proceeds to HBC of €411 million ($616 million), and value the German real estate assets at a total of €3.25 billion ($4.88 billion) compared to the total Galeria Kaufhof purchase price of €2.51 billion ($3.77 billion) in 2015. The net proceeds, together with the implied value of HBC’s remaining interest in these real estate assets, net of debt, totals $8.71 per share.

The combination of the retail companies and the formation of the real estate joint venture are expected to occur within the next 90 days and are subject to approval from European competition authorities and satisfaction or waiver of customary closing conditions. Follow on real estate transactions, and receipt of proceeds therefrom, are expected to occur through early 2019. HBC directs investors to its public filings available at www.sedar.com and at www.hbc.com for additional information and details of the transactions.

Solomon Partners acted as financial advisor to HBC on the transaction.

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