According to a report in the Bild am Sonntag tabloid newspaper, Metro CEO Eckhard Cordes wrote to Economics Minister Karl-Theodor zu Guttenberg last week to offer what the paper quoted as "comprehensive and constructive talks for a private market solution" to secure the future of the Karstadt department store chain. The discussions were to include a "cooperative arrangement and possible merger" of Karstadt with Metro's own department store chain, Galeria Kaufhof. Metro, one of Europe's largest retailers, also runs its own brand name supermarket chain.

Arcandor, which operates the Quelle mail-order business, Karstadt department stores and the Thomas Cook travel agency chain, has been in trouble for several years, with other retailers chipping away at its market share.

In a statement, Arcandor boss Karl-Gerhard Eick said he was willing to talk about Metro's proposal, but doubted whether the German competition authorities would allow a merger of the country's two largest department store chains. Together, Karstadt and Kaufhof have 247 stores nationwide.

Arcandor a victim of the credit crunch

Last Friday, Arcandor said it would appeal to Chancellor Angela Merkel's government for a 650 million euro bailout to stave off collapse.

Chief executive Eick said a decision was needed within four weeks so that banks could roll over the 650 million in credit that expires on June 12. Eick said the global economic crisis was making it difficult to obtain new credit without government guarantees.

Four months from a general election, the demand could put the government on the spot. A closure of Karstadt and Arcandor's famous century-old KaDeWe luxury department store in Berlin would wipe out a shopping institution – not to mention more than 50,000 jobs.

gb/dpa/Reuters
Editor: Kateri Jochum