René Benko (left) currently owns Karstadt, Nicholas Berggruen (center) was the owner and Thomas Middelhof ran the business in the early 2000s. picture alliance /ullstein picture Dtl. / Donato Sardella / getty images / picture alliance / HANS KLAUS TECHT / APA / picturedesk.com | HANS KLAUS TECHT/Collage: Dominik Schmitt
Galeria Karstadt Kaufhof (GKK for short) has a new investor and new owner if all creditors agree in May.
This is Richard Baker, who was the owner of Galeria Kaufhof for four years. Bernd Beetz, who was chairman of the department store chain’s supervisory board for around a year, supported him in his current pitch.
The department store chain has a rich history of colorful owners. Both on the Kaufhof and Karstadt sides.
The shaking is over. The department store chain Galeria Karstadt Kaufhof has a new investor and will probably also have a new owner in the future, who is actually an old acquaintance. It is Richard Baker, who has now been awarded the contract for the department store group through his family office. Baker has been the head of Kaufhof for four years. In January, GKK slipped into bankruptcy for the third time.
It is not the first time that both Kaufhof and Karstadt are facing bankruptcy. Karstadt in particular, which was founded in Essen in 1881, has experienced many ups and downs. The owners and managers changed frequently and were sometimes controversial. We have put together the most colorful people from Karstadt over the past few years for you.
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Thomas Middelhoff
Thomas Middelhoff at a reading in 2019. picture alliance / SvenSimon | Elmar Kremser/SVEN SIMON
Middelhoff first came to Karstadt from Bertelsmann-Verlag in 2004, initially as chairman of the supervisory board. The chain had already undergone a merger back then. In 1999, Karstadt was merged with the Quelle Schickedanz AG mail order company, with Quelle heiress Madeleine Schickedanz as the largest shareholder the “Manager Magazine” reported. She is said to have been the one who brought Middelhoff back then, as he himself did in an interview with the industry magazine “E-Tailment” told. Even then, Karstadt Quelle is said to have been on the verge of bankruptcy, only a deal between Schickedanz and the Sal bank. Oppenheimer and his real estate partner Josef Esch saved the business, says “Manager Magazine”. In 2005, Middelhoff became chairman of the board.
Under Middelhoff’s aegis, properties were sold and then rented back by the chain. The idea behind it: The group should heal itself through sales. However, the high rents drove the balance sheets into the red. And Middelhoff was responsible for another milestone: under his leadership, Karstadt became Quelle Arcandor. But at the beginning of 2009 it was over for Middelhoff and he left. Instead, Karl-Gerhard Eick, former CFO of Deutsche Telekom, came.
Middelhoff was later sentenced to three years in prison in 2014 for 27 counts of breach of trust and tax evasion. This involved, among other things, the billing of private air travel during his time at Arcandor.
rene
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Manager Eick had to pay for the mistakes of the past. He applied for state aid from the federal government’s so-called “Germany Fund”. But it didn’t help: In June 2009, Arcandor filed for bankruptcy, and its subsidiaries Karstadt and Quelle also filed for bankruptcy. Just a year later, Quelle was liquidated and no buyer was found for the company. Things looked different at Karstadt. A buyer was found for the department store chain – and what a buyer.
Nicholas Berggruen
Nicholas Berggruen in a photo from 2010. picture alliance / dpa | Stephanie Pilick
When Nicholas Berggruen took over Karstadt in 2010, the corks popped – not just literally, but literally. In Berlin, Karstadt employees hugged each other and thought their jobs had been saved. Ursula von der Leyen (CDU), then Federal Minister of Labor, spoke of a “day of joy”. But the German-American investor and art patron, son of the art collector Heinz Berggruen, first made demands. The employees were supposed to accept salary cuts for two years in order to help save Karstadt. Nevertheless, there were job cuts in 2012 and around 2,000 people had to leave. Incidentally, Berggruen himself is said to have invested hardly anything in the department store chain – although he supposedly took it over for a symbolic euro, as the “Welt” reported. Instead, Berggruen is said to have withdrawn money from Karstadt himself using the license rights he owned to the name.
Then came the division, three years after Berggruen’s purchase. The subsidiary Karstadt-Sport and three premium stores, including the KaDeWe in Berlin and the Oberpollinger in Munich, were organized and sold as separate companies. The first entry for René Benko, a real estate investor from Austria. At that time he is said to have taken over 75.1 percent of the company’s subsidiaries. This began the Benko chapter for Karstadt.
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René Benko
René Benko, taken in 2014. picture alliance / HANS KLAUS TECHT / APA / picturedesk.com | HANS KLAUS TECH
In 2014, just four years after purchasing Berggruen, Karstadt changed hands again. The new owner was René Benko, known in Austria as a real estate investor and self-made billionaire. Since at the time of the complete takeover Benko already owned 75 percent of the shares in the group’s sports and premium divisions, as the SZ wrotethe remaining 25 percent of the shares were added at that time as well as the core business: 83 department stores.
Benko also joined Kaufhof; the chain was also not doing well economically. In 2018, the Federal Cartel Office gave the green light and both companies were able to merge. It was the birth of Galeria Karstadt Kaufhof, or GKK for short. The giant had over 243 locations across Europe and around 32,000 employees.
But online trading has become stronger and is not just affecting GKK. The corona pandemic begins in March 2020, including lockdowns, which also affect GKK. In May 2020, GKK entered into a protective shield insolvency. In the Interview with the “Frankfurter Allgemeine Zeitung” (FAZ) Benko said: “We were in the middle of the integration process when Corona struck. The GKK team was then de facto banned from working for nine months.” As a result, the important Christmas business was destroyed once and the Easter business twice, said Benko. A new concept was supposed to help combat the low purchasing mood: Some branches were to become regional flagship stores, the chain was given a new logo and should from now on only be called “Galeria”.
But that didn’t help the balance sheets much. In 2021, the ailing department store chain will have to turn to the state Economic Stabilization Fund (WSF) and received a subordinated loan for 460 million euros. In February 2022, the WSF granted the company further support of 250 million euros in the form of a so-called “silent contribution”, a partial amount of 30 million euros of which was used to repay the first WSF financing. The company has not yet repaid any other tranches. In total, GKK received 680 million euros in state aid from the federal government. However, that didn’t help much.
In the 2020/21 financial year, GKK made a loss of 622 million euros on sales of 2.1 billion euros. According to the annual report, management also expected an “annual deficit in the low to mid three-digit million range” for the 2021/22 financial year, which ended at the end of September.
And Benko’s image was also damaged. In his native Austria he came under suspicion of bribery. Between 2016 and 2018, Benko is said to have offered a senior employee in the Ministry of Finance a lucrative management position in exchange for partisan support in his group’s tax audit proceedings, reported the “FAZ”, with reference to the decision to raid Benko’s company. And Benko also had to appear in the Ibiza investigative committee for questioning because he had been named as a supposed party donor by the former chairman of the FPÖ Heinz-Christian Strache in the so-called “Ibiza video”.
Troubled times for René Benko. If GKK fails to save itself through the renewed insolvency proceedings, the department store chain’s chapter could end with it – unless a new buyer is found at the last minute. In Karstadt’s long history, it’s not that unlikely.