grocery deal

Mediation Man Schröder

  • Why it matters

    Why it matters

    If supermarket chain Edeka ends up buying Kaiser’s Tengelmann, it would increase its dominance of the food retail market in Europe’s largest economy. But if the deal collapses, many jobs could be lost.

  • Facts

    Facts

    • Former Chancellor Gerhard Schröder on Tuesday started to mediate between leading supermarket retailers over the future of the loss-making Kaiser’s Tengelmann chain.
    • If the talks collapse, Kaiser’s Tengelmann may be broken up and its stores sold one by one, putting many of its 16,000 jobs at risk.
    • Edeka wants to buy Kaiser’s Tengelmann but a court has suspended a government decision to permit the takeover pending a court case starting in mid-November.
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    Audio

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ruerup-and-schroeder-buetzmann-for-hb
Gerhard Schröder and Bert Rürup are aiming to sort out a supermarket deal and prevent job losses. Source: Bützmann for Handelsblatt

Gerhard Schröder, no stranger to tough negotiations, began to mediate on Tuesday between three of Germany’s biggest supermarket chains to thrash out a way of saving thousands of jobs at loss-making group Kaiser’s Tengelmann.

The Social Democrat, who famously intervened to arrange a rescue for construction company Holzmann while he was chancellor, held preliminary talks with all parties in the latest chapter of protracted saga that began with a bid by Edeka, Germany’s largest food retailer, for Kaiser’s Tengelmann back in 2014.

In an agonizing roller-coaster ride for the more 16,000 staff of Kaiser’s Tengelmann, the country’s Federal Cartel Office last year rejected the takeover on the grounds that it would hurt competition, but that decision was overruled this year by Economy Minister Sigmar Gabriel.

The minister was then himself overruled by a court injunction in July suspending his decision. The Higher Regional Court in Düsseldorf, in western Germany, is due begin hearing the case on Nov. 16.

Recent talks between Edeka and rival supermarket group Rewe on the future of Kaiser’s Tengelmann broke down this month, pushing the firm closer to the prospect of being broken up and having to sell or shut down its stores one by one.

Mr. Schröder has a mixed record as a mediator.

Mr. Schröder has now launched a last-ditch attempt to moderate a settlement. He is being advised by economist Bert Rürup, the current president of the Handelsblatt Research Institute, who formerly headed the German Council of Economic Experts that advises the government.

Mr. Schröder has a mixed record as a mediator. He failed in 2006 to resolve a wage dispute at the German railway but he persuaded banks in 1999 to fund a rescue of builder Holzmann — which ended up filing for insolvency two years later. Mr. Rürup successfully mediated a deal between national airline Lufthansa and cabin crew union Ufo in 2012.

Achim Wambach, the head of the Monopolies Commission which had voiced serious reservations about a takeover of the 450 Kaiser’s Tengelmann stores by Edeka, on Tuesday criticized the talks.

“The fact that three rivals are sitting at a table and deciding on how to arrange their competition is not a favorable constellation, with or without a mediator,” Mr. Wambach told Handelsblatt, referring to the firms Edeka, Rewe and Kaiser’s Tengelmann. “There’s not much likelihood that the negotiations will produce a result that’s good for competition.”

It’s even doubtful whether the mediation will succeed. Two of the rival supermarket chains that took court action against Mr. Gabriel’s decision, Norma and Markant, have agreed to drop their lawsuit, meaning that only Rewe still opposes a sale. If Rewe followed suit, the case would be closed and the sale to Edeka could go ahead. But Rewe has dug in its heels.

Edeka wants to purchase the entire Kaiser’s Tengelmann chain, but Rewe wants to buy a large number of the stores too, which prompted it to take legal action against the decision by Mr. Gabriel, the economics minister, to permit the takeover by Edeka.

Mr. Schröder now faces the uphill tasks of somehow marrying these conflicting interests under the watchful eyes of the Federal Cartel Office and the Monopolies Commission, which don’t want the sale to Edeka to go ahead.

Mr. Wambach said the Monopolies Commission opposed Mr. Gabriel’s decision to permit the takeover “because it can’t protect jobs and obstructs competition.”

Under the agreement permitted by Mr. Gabriel, some of the Kaiser’s Tengelmann stores could be sold to buyers other than Edeka provided that the employees agreed. But Rewe doesn’t want to settle for just a small number of the stores.

In a provisional agreement reached on October 6, Rewe was to get all the Kaiser’s Tengelmann stores in Berlin and the northern Rhine region of western Germany. But that deal failed because it wasn’t legally watertight.

So Kaiser’s Tengelmann has begun preparing for the worst, and has been talking to provisional buyers about 102 of its stores in northwestern Germany. The sales have been put on hold for the duration of the mediation talks.

Buyers are lining up if the mediation fails. Discount retailer Lidl this week voiced interest in some of the sites.

 

Florian Kolf covers the retail sector for Handelsblatt. Dana Heide writes about energy, small and medium sized companies and innovation out of Berlin for Handelsblatt. To contact the authors: kolf@handelsblatt.com, heide@handelsblatt.com

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