End of the Benko era: Galeria is bankrupt again - why that can also be a liberation

Galeria Karstadt Kaufhof is bankrupt – this news unfortunately sounds all too familiar by now.

End of the Benko era: Galeria is bankrupt again - why that can also be a liberation

Galeria Karstadt Kaufhof is bankrupt – this news unfortunately sounds all too familiar by now. This Tuesday it's that time again. The department store group has filed for bankruptcy at the Essen district court. It is the third bankruptcy in three years after 2020 and 2022. The future of the remaining 92 department stores with around 15,000 employees is once again uncertain. We are now looking for investors and a new owner to lead Galeria into the future. The company explained that relevant discussions have already begun. The aim is to continue Galeria.

The Galeria bankruptcy comes with an announcement. The empire of the Austrian real estate investor René Benko, whose empire includes Galeria, has been falling apart for weeks. Benkos Signa-Holding and numerous subsidiaries are themselves insolvent, which led, among other things, to the halt in construction of the spectacular Elbtower megaproject in Hamburg.

Now Galeria is looking for a way out of the Signa maelstrom with its own bankruptcy filing. "The Signa Group's bankruptcies are causing massive damage to Galeria, hindering ongoing business and severely restricting future development opportunities through high rents and expensive services," said Galeria boss Olivier van den Bossche. “We expressly see today as a liberation.”

The Galeria bankruptcy means the end of the Benko era, who once appeared as the supposed department store savior and ultimately only managed the decline. In 2014, Benko initially took over the reins at Karstadt and, after merging with Kaufhof in 2018, became the strong man of the entire Galeria chain. Even back then, critics accused Benko of only being marginally interested in the department store business and of primarily targeting properties in prime locations.

In fact, as part of the restructuring process under Benko's reign, Galeria closed dozens of unprofitable locations and laid off thousands of employees. Benko showed a particular talent in enlisting the German state in his rescue operations. He extracted 680 million euros in state aid from the economic stabilization fund from the federal government during the Corona crisis. He only repaid 40 million of that, as the Federal Ministry of Finance confirmed to “Capital”. Not much will be added; in the end, the Galeria rescue will cost the state more than half a billion euros.

Galeria probably cannot expect any further government aid. The situation is also critical for Galeria because Benko will no longer make planned investments worth millions. During the last insolvency proceedings, Benko had promised a financing injection of 200 million euros for 2024, which has now been canceled.

On the other hand, by separating from Benko, Galeria also has the opportunity to get rid of significant burdens. Signa charged particularly high rents at the Galeria locations where the group itself acted as landlord. In the course of the upcoming insolvency proceedings, the rents could now be renegotiated. “The fact that the core companies of the Signa Group are now insolvent means that we can free ourselves from the Signa Group and its interests,” said Galeria works council boss Jürgen Ettl to Wirtschaftswoche.

If the rents at the Signa locations were reduced to a market level, the business could be operated profitably, said Ettl. Nevertheless, he assumes that jobs will also be lost. The Handelsblatt reports with reference to corporate circles that around 60 of the 90 Galeria branches are currently significantly profitable. These could form the core of the new Galeria.