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Berggruen Wants Karstadt Landlords to Reduce Rents

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May 26 (Bloomberg) -- Berggruen Holdings Ltd., the investment company that’s bidding for Germany’s Karstadt, wants landlords of the insolvent department-store chain to cut rents to aid the retailer’s long-term survival.

“Rents are far too high and clearly above the market level,” Nicolas Berggruen, owner and chief executive officer of the investment firm, said in a telephone interview from Sierra Leone, where he’s looking after some of his philanthropic projects. Karstadt is the department-store unit of insolvent German retailer Arcandor AG.

Insolvency administrator Klaus Hubert Goerg began talks in February with potential buyers of Karstadt, which employs 25,000 people. Private-equity company Triton and Berggruen are the only bidders that identified themselves. Karstadt’s real estate is mostly owned by the Highstreet investor consortium.

Highstreet, which is 51 percent-owned by Goldman Sachs Group Inc., is also examining the retailer’s accounts and may present a bid before a May 28 deadline for final offers, two people familiar with the matter said May 18. Highstreet may seek investment partners, including Triton, to contribute equity to an offer, one of the people said.

A spokesman for Highstreet declined to say if the consortium is in talks with Berggruen about rent cuts.

Max Azria

“The company was for a long time under pressure and couldn’t invest sufficiently into its operations because of the high rents,” Berggruen said. He will stay invested in Karstadt in the long term and has no exit strategy, he said.

Berggruen also said that he won’t ask workers to contribute beyond wage cuts they have already accepted.

The investor will have U.S. fashion company BCBG Max Azria Group as strategic partner for sourcing and merchandizing in Karstadt’s operations. Owner Max Azria will “probably” take a stake in the department-store chain, Berggruen said. Berggruen said he is also in a position to make the investment with his own means.

Triton will make a binding offer for Karstadt to meet the May 28 deadline, John Mengers, a spokesman for Triton at Communications & Network Consulting AG in Munich, said today by phone. He declined to comment on the terms. Thomas Schulz, the insolvency administrator’s spokesman, said by telephone that it hadn’t received the bid yet.

Berggruen, son of late German art collector and journalist Heinz Berggruen, ranked 397th on last year’s Forbes world’s billionaires list. He has an estimated fortune of $1.8 billion.

“Karstadt is a German brand with a cult status,” Berggruen said. The retailer though needs fresh ideas to become more attractive to shoppers, he said.

To contact the reporters on this story: Holger Elfes in Dusseldorf, Germany, at helfes@bloomberg.net; Tom Mulier in Geneva via tmulier@bloomberg.net

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net.

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