Arcandor Stock Plunges After New Call for State Aid

Shares of German retail and tourism group Arcandor dropped more than a quarter on Monday after Chief Executive Karl-Gerhard Eick reiterated at the weekend his company was doomed without state aid. 

A German government committee is to examine the scope for Arcandor's requested loan guarantees this week, a government source told Reuters. However, final decisions were not expected at that meeting, the source said. 

"There is no private-sector solution. There is no alternative to state aid," Eick had told the weekly Frankfurter Allgemeine Sonntagszeitung. He is asking for new loans of 200 million euros ($279.9 million) and guarantees of 650 million. 

"Without guarantees, we will have to choose a different path. Then the company is threatened by insolvency," Eick told German tabloid Bild.

Arcandor shares were down 15.5 percent at 1.55 euros, in European afternoon trading.

Arcandor is under pressure to renew credit lines worth up to 710 million euros by June 12 to ensure its survival.

The company is struggling with weak sales in its Karstadt department store and its Primondo mail order business, leaving its majority-owned tour operator Thomas Cook as its sole cash cow.

Rival retailer Metro has called to combine the two companies' department store chains.

Arcandor Chairman Friedrich-Carl Janssen has called this plan an "immoral" proposal but he did not fundamentally oppose a merger, German weekly Der Spiegel reported.

Metro's proposal to create a "German Department Store Inc" could make it harder for Arcandor to secure state support by offering a cheaper alternative for ministers, some of whom oppose giving aid set aside for victims of the credit crunch to a company with long-term problems.

Metro, the world's fourth-biggest retailer, is against government aid for its rival, arguing it would curb competition.

Under its plan, Metro and the owners of the Karstadt stores' real estate would each hold just under 50 percent in a new German Department Store, with banks and investors owning the rest. A source close to the matter has said this was not set in stone and Arcandor could also take a stake. 

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