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Karstadt to Be Sold to Berggruen Holdings After Beating Two Other Bidders

Berggruen Holdings Ltd., an investment firm, won the bidding for Karstadt AG, edging out two other offers for the German department store operator owned by insolvent Arcandor AG.

Berggruen’s offer was chosen by a “significant majority” of the committee’s members, insolvency administrator Klaus Hubert Goerg said in an e-mailed statement today. No financial details were disclosed.

“We presented the best business concept, have the most entrepreneurial strategy and offer the highest chances for long- term success,” Nicolas Berggruen, owner and chief executive officer, said in a statement. “We ask for the cooperation of all parties to get on with the real job of putting Karstadt back on track.”

The selection caps off more than four months of the administrator searching for an investor. The deadline for offers was extended to allow potential buyers more time to win concessions on rents and wages to control costs as the department store operator loses market share to smaller outlets. Private equity company Triton and the Highstreet partnership, which owns most of Karstadt’s real estate, also made bids.

Berggruen declined to disclose whether it won any concessions on rent at the Karstadt outlets, said Wolfgang Weber-Thedy, a company spokesman, today. While the other bidders wanted Karstadt’s 25,000 workers to agree on wage cuts or more flexible working hours, Berggruen had pledged he wouldn’t ask the employees to contribute beyond salary reductions they have already accepted and which are worth about 150 million euros ($179 million) over three years.

‘Pyrrhic Victory’

“This may be a Pyrrhic victory today,” said Klaus Kraenzle, an analyst at GSC Research in Dusseldorf. Discussions about rent cuts will remain difficult, he added.

The Ver.di labor union, which represents some Karstadt workers, said today it supports Berggruen’s bid. Triton had wanted performance-linked wages for workers and “market-conform rents” for the outlets as part of its plan, which also included a pledge to invest 500 million euros in the business.

“We have from the beginning clearly communicated all conditions which are necessary for success,” said John Mengers, a spokesman for Triton. “Berggruen Holdings was obviously more open for compromises.”

Berggruen’s History

Berggruen will have U.S. fashion company BCBG Max Azria Group as a strategic partner for sourcing and merchandizing in Karstadt’s operations, Berggruen said last month.

Berggruen, son of late German art collector and journalist Heinz Berggruen, ranked 397th on last year’s Forbes list of the world’s billionaires with an estimated fortune of $1.8 billion. He planned to stay invested in Karstadt for the longer term and has no exit strategy, he said last month.

Arcandor put most of its real estate into the Highstreet fund in 2006, selling a majority to Goldman Sachs Group Inc.’s Whitehall real estate fund for 3.7 billion euros ($4.4 billion). More than two years ago, the retailer sold its 49 percent stake in Highstreet for 800 million euros to a group formed by Pirelli & C. Real Estate SpA, Generali Real Estate Fund SA, Deutsche Bank AG’s RREEF Real Estate and Borletti Group.

Arcandor traces its roots to the 1999 merger of Karstadt and Schickedanz Group’s Quelle home-shopping unit. Karstadt’s first department store opened in 1881, during the reign of Kaiser Wilhelm I. Its West Berlin outlet -- Kaufhaus des Westens, or KaDeWe -- was an icon of capitalism during the Cold War.

To contact the reporter on this story: Holger Elfes in Dusseldorf, Germany, at helfes@bloomberg.net and Patrick Donahue at pdonahue1@bloomberg.net

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