Retailer Arcandor in last-ditch talks with rival

By AFP

July 15, 2010 Updated Jun 7, 2009 at 11:02 AM CDT

Stricken German retail giant Arcandor held crunch tie-up talks with a rival firm on Sunday as reports said that the majority owner of Thomas Cook could file for insolvency imminently.

The negotiations about a possible merger of Arcandor and Metro's department store chains Karstadt and Kaufhof included the chief executives of both companies plus two banks, a Metro spokesman told AFP.

The talks came as Chancellor Angela Merkel again upped the pressure on Arcandor, which employs 50,000 people in Europe's biggest economy, and its owners to do more to rescue the company.

Last week the European Commission said it would object to Arcandor getting 650 million euros (930 million dollars) in loan guarantees from a government fund set up to help companies hit by Germany's worst postwar slump.

A spokesman for EU Competition Commissioner Neelie Kroes said that Arcandor was already in difficulties before the credit crunch hit in mid-2008, meaning it was ineligible to receive help.

Instead the company applied on Friday for 437 million euros worth of cheap loans from a different source -- the state development bank, the KfW.

In late May, Merkel's government agreed to support with billions of euros (dollars) of taxpayers' money a takeover of General Motors' Opel unit by Canada's Magna and state-owned Russian lender Sberbank.

But she has insisted that Opel was a "special case" and on Sunday Merkel hit out at what she called the "serious mis-management" of the company and called on the firm's owners and creditors to do more to save it.

"I find it unacceptable that people call on the state for help when they themselves must do something," Merkel told the Bild am Sonntag weekly.

Arcandor owns a 52-percent stake in Europe's second biggest tourism group Thomas Cook, the Karstadt chain of department stores and iconic shops such as the KaDeWe in what used to be the commercial heart of West Berlin.

German media reports said on Sunday that Arcandor could file for insolvency as soon as on Monday, and that it stopped paying rent on its department stores -- owned by a group of investors led by US bank Goldman Sachs -- on June 1.

Around 600 million euros worth of loans come up for refinancing on Friday.

Metro chief executive Eckhard Cordes told Bild am Sonntag that a merger of Kaufhof and Karstadt would probably mean that around 40 of the two firms' 200 department stores would have to close their doors.

"Our rescue plan shows that our long-term view would be some 160 department stores in Germany," he told the paper.

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