Thailand’s largest retail conglomerate on Tuesday bought control of one of the West’s most powerful symbols of Cold War capitalism, an eight-story luxury department store emporium located in former West Berlin called Kaufhaus des Westens.
The Central Group, Thailand’s largest retail conglomerate, said in a statement that it had acquired a 5o.1 percent stake a company that owns “KaDeWe,” as the department store is called by its abbreviation in German, and two other luxury centers in Munich and Hamburg.
The Thai investors did not disclose financial details of the purchase.
Central Group is owned by the Chirathivats, Thailand’s third-richest family, according to Reuters.
KaDeWe was a Cold War showcase of western capitalism and economic might located 2.5 miles (4 kilometers) from the Brandenburg Gate and former East Germany.
Signa Holding, a real estate company owned by Austrian investor René Benko, will retain 49.9 percent in KaDeWe and the other two centers, Oberpollinger in Munich and Alsterhaus in Hamburg. Like KaDeWe, the two other department stores cater to wealthy customers and are located in expensive, imposing old buildings in central urban locations.
Together, the three stores have about 1,900 employees and had combined sales of €600 million ($667 million) and a total of 105,000 square meters of sales floor.
Mr. Benko’s firm manages €6 billion worth of commercial real estate in Austria, Germany, Italy, Switzerland and the Czech Republic.
KaDeWe, pronounced KAH-day-vey in German, is the largest department store in central Europe, attracting up to 50,000 visitors each day to sample its range of luxury textile, jewelry, household goods and other products.
The shopping temple, whose name means “Department Store of the West” in German, was a Cold War showcase of western capitalism and economic might located 2.5 miles (4 kilometers) from the Brandenburg Gate and former East Germany.
On its website, the department store says it has more than 380,000 items for sale over KaDeWe’s 60,000 square-meter sales floors, ranging from Italian shoe maker Tod’s to Prussian high-end whiskey.
The department store’s history was as colorful as the German capital’s. It was built in much smaller size at its current location on Tauentziehen Strasse along West Berlin’s shopping mile in 1905 by local businessman Adolf Jansdorf, according to the company’s website.
The building was expanded to its current girth but largely destroyed in 1943 during the bombing of Berlin and the crash of an American bomber into the granite-facade building, which gutted the store. In the Cold War aftermath, the German government with western support rebuilt KaDeWe, which reopened in 1956.
“The trend in Germany indicates a boom in low-cost outlets and a boom in high-end department stores while middle-priced stores are falling back”
The store was one of the most visible symbols of the Cold War, a constant reminder to the Communist rules of impoverished East Berlin of the superiority of the West’s economic might and free-market role model.
But following the fall of the Berlin Wall, KaDeWe lost its symbolic power and its captive, West German market, and began to struggle. The stores were acquired in 1994 by the KarstadtQuelle group, one of Germany’s largest retail chains, which struggled through several owners amid the growth of online shopping until Mr. Benko bought the group in 2013.
The sale of KaDeWe and the other two luxury centers is the first big move taken by Mr. Benko, who is just 38, since he acquired the Karstadt group. By selling a majority in the stores to the Thai investors, analysts said, Mr. Benko is acquiring retail know-how to compete with other, more experienced retail investors moving into Germany.
Mr. Benko is also believed to be bidding for the Kaufhof department store chain, the other major national German retail chain besides Karstadt. He is reportedly competing against U.S.-Canadian department store chain Hudson’s Bay, which this month submitted a preliminary offer for Kaufhof, company sources told Handelsblatt.
Hudson’s Bay is an established retailer, while Mr. Benko comes from a commercial real estate background. Both companies have declined to comment confirm their bids for Kaufhof, although neither has denied extensive media reports.
“The timing of this deal (with the Thai investors) seems to indicate that Mr. Benko is trying show that he has retail competencies now too,” said Joachim Stumpf, the head of BBE, a retail management consultant in Munich. “He can now come closer to competing with his Canadian rival.”
Hudson’s Bay Chief Executive Richard Baker is believed to have made an offer similar in size to Mr. Benko for Kaufhof earlier this month: roughly €3 billion, or $3.34 billion.
Mr. Benko’s new cooperation with Thailand’s Central Group will give him access to retail-management know-how, a wider range of global and Asian brands and entertainment content. A Milan-based subsidiary of Thailand’s Central Group called La Rinascente bought the stake in KaDeWe and the other two stores.
“The Central Group and its Rinascente stores have access to many international brands. They know how to select good brands and operate in this sector,” Mr. Stumpf said.
Retailing in Germany, like the rest of Europe, has gone through a signficant transformation with the advent of online competitors, who have lowered prices and challenged many traditional storefront retailers. In general, the German economy is growing steadily and consumer spending is at a post-Cold War high.
The greatest pressure is coming down on retailers who serve the country’s vast middle class, experts said.
“The trend in Germany indicates a boom in low-cost outlets and a boom in high-end department stores such as KaDeWe while middle-priced stores are falling back,” said Bianca Casertano, a retail analyst at Planet Retail, a Frankfurt consultancy.
By enlisting the Thai investors and their retail experience, Mr. Benko is hoping to gain the expertise he needs as a real estate investor to compete over the long term in Germany’s new retail landscape.
“Mr. Benko is a real estate investor by DNA, who has a vital interest that retail is flourishing in those buildings,” said Mr. Stumpf. “So he gets in an expert who knows what he is doing.”
Franziska Scheven and Sarah Mewes are editors with Handelsblatt Global Edition, covering companies and markets. Kevin O’Brien is the editor in chief at the online-paper. To contact the authors: firstname.lastname@example.org, email@example.com and firstname.lastname@example.org