TORONTO and DÜSSELDORF, Germany—Hudson's Bay Co., which owns Saks Fifth Avenue and Lord & Taylor in the US, said Monday it had reached an agreement with Dsseldorf-based Metro Group to acquire Metro's Galeria Kaufhof department store group. The deal, which also includes Kaufhof's Belgian subsidiary, is valued at €2.825 billion (US$3.2 billion), including the assumption of debt.

Specifically, HBC is taking over 103 Galeria Kaufhof stores in Germany, including 59 in prime CBD locations, 16 Sportarena stores and 16 Galeria Inno department stores in Belgium, along with logistics facilities and Kaufhof's head office in Cologne. The deal will give Toronto-based HBC, North America's oldest company, 464 stores in North America and Europe under eight different banners.

The acquisition is expected to close in the third quarter, and will mean HBC's business deriving about one-third of its revenues from European operations., “This transaction is a significant step forward in our plans to become a premier global retailer,” says Jerry Storch, CEO of HBC.

Adds HBC's chairman, Richard Baker, “We have been carefully surveying the European retail landscape for many years for a potential expansion opportunity and have watched Galeria Kaufhof build on its exceptional real estate to become the #1 department store in Germany.” He says the acquisition is “the right investment and the right time.”

For its part, Metro decided to sell the Kaufhof business in order to concentrate on its wholesale business Metro Cash & Carry, its consumer electronics division Media-Saturn and its hypermarket chain Real in the future. "We will also use the proceeds from the sale of Galeria Holding GmbH for greater investment in our other sales channels, thus ensuring the group's future growth,” says Metro chairman Olaf Koch.

BofA Merrill Lynch is acting as exclusive financial advisor to HBC on the transaction. Willkie Farr & Gallagher LLP is acting as M&A legal counsel, and Stikeman Elliott LLP is acting as company legal counsel. Metro is being advised by JP Morgan and Deutsche Bank and Clifford Chance is serving as legal counsel.