The end of Karstadt

If one person can be less than thrilled about the purchase of Galeria Kaufhof by the Hudson's Bay Company, it's René Benko, the shrewd Austrian investor who owns the ubiquitous yet embattled German department store chain Karstadt.

For years, Karstadt has been languishing and for years, one ambitious billionaire after another has tried his hand at bringing the company back into the black.

There was Thomas Middelhoff, a man who today either can't or doesn't feel terribly compelled to pay back his lenders. Then came the cosmopolitan Nicolas Berggruen, who at least was able to save the company from bankruptcy.

Soon realizing that he could not help restore Karstadt to its original splendor, he again sold the chain to the afore mentioned Benko. The sale price? One euro - the same amount Berggruen paid to takeover Karstadt in the first place.

Benko has never tired of saying that he has two things: Money and a plan. He already owned three of Karstadt's flagship stores - Berlin's iconic KaDeWe, the Oberpollinger in Munich and the Alsterhaus in Hamburg - before selling a majority stake to Thailand's Central Group. Wouldn't that make a nice headline? Imagine: The Deparment Store of the West Sold to the Far East.

No publicly listed German department store

Benko was hoping to use the proceeds from that sale to finance his next coup - the takeover of competitor Kaufhof. That chain belongs to the German retail giant Metro, which is currently in the process of adjusting its portfolio.

Until now, Benko's dream of a publicly listed German department store chain made up of Kaufhof and Karstadt wasn't even that far-fetched. Kaufhof is doing well enough. (Compared to Karstadt it's practically a goose that lays golden eggs.) It seems likely, however, that had Benko won the bid, only one of the two chains would remain.

Now the former fur traders of Canada's time-honored undertaking Hudson's Bay are entering the game. For the German retail market, this is good news. The Canadians have emphasized they have no intention of closing any stores but want to rather use the acquisition as a base for their European expansion plans. They have said they mean to invest massively and may even hire additional people.

What about the Spaniards?

For the 17,000 remaining Karstadt employees, however, the takeover is nothing short of bad news. It's simply impossible to imagine what could be done to get Karstadt back on course.

Benko's plan of fusing Karstadt and Kaufhof might have worked but it may have taken heavy losses. Alone, Karstadt stands no chance.

Benko will have to keep looking for a strong partner. Perhaps the Spanish competitor, El Corte Ingles, feels up to the challenge, what with Hudson's Bay encroaching on its territory? At the very least, the future of German retail promises to continue deserving our attention.