06/15/2015 03:16 EDT | Updated 06/14/2016 05:59 EDT

Hudson's Bay Co. acquires Germany's Galeria Kaufhof chain for $3.9 billion

COLOGNE, Germany - The Hudson's Bay Co. (TSX:HBC) has reached an agreement with German based Metro Group to buy its Galeria Kaufhof department store chain and Belgian subsidiary Inno for $3.9 billion, including the assumption of certain liabilities.

The Toronto-based retailer says in a release issued jointly with Metro Group early Monday morning that the transaction has been approved by both its board of directors and Metro AG's supervisory board.

The release says the deal, which has been in the works for several weeks, is expected to close by the end of the third quarter of 2015, with HBC taking over 103 Galeria Kaufhof stores in Germany, including 59 properties in prime inner-city locations.

HBC, which operates Saks and other chains in the U.S. and Canada, will also acquire 16 Sportarena stores, 16 Galeria Inno stores in Belgium, various logistics centres, warehouses and other properties, and the Galeria Kaufhof head office in Cologne.

The agreement is said to include "extensive commitments" to maintain employment levels and store count, and for Galeria Kaufhof to remain headquartered in Cologne.

"This is an exciting transaction that demonstrates our proven growth formula in action, and it is the right investment and the right time," Richard Baker, HBC's Governor and Executive Chairman, says in the release.

"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 number one department store in Germany."