UPDATE: Berggruen's Karstadt Bid Includes BCBG Partnership

Private investor Nicolas Berggruen's bid for insolvent German retailer Karstadt includes a business partnership with U.S. fashion company BCBG Max Azria, Inc., Berggruen said Tuesday.

BCBG "knows merchandising well, and that at the end of the day is what matters," Berggruen told Dow Jones Newswires in an interview. "Karstadt is a good name with good stores and very good revenues. Like all such retailers they need something fresh, and that's where BCBG comes in."

Berggruen wouldn't discuss financial details of his agreement with BCBG but referred to it as a "proper partnership" in which financial risk would be shared.

BCBG wasn't immediately available for comment.

He promised to invest "as much as needed for his plan to work" but wouldn't provide specific details on his Karstadt bid. The offer has been made through his investment fund, Berggruen Holdings.

Berggruen has been eyeing a deal for Karstadt for months but only publicized his interest in the iconic retail brand last week. BCBG has been conducting its own due diligence in Germany for weeks, he said.

Karstadt's insolvency administrator has until the end of the week to line up a buyer or the company will be broken up. The company's woes intensified last June when parent company Arcandor AG (ACAGF) filed for insolvency after failing to secure government aid.

Berggruen wouldn't discuss the state of negotiations with the Highstreet real estate consortium, which is a major owner of Karstadt properties and would need to lower rents for Berggruen's plan to succeed. "We hope it works because that's what is best for Karstadt," he said.

Berggruen defended his interest in a deal against skepticism in financial circles and in the media about how serious his last-minute bid was.

"Ask the unions how serious we are," Berggruen said, referring to successful discussions he has already completed with Karstadt's labor representatives, who have expressed concerns about possible job cuts. "We are working day and night on the offer, and we are a serious investor," he said.

Karstadt could be acquired by Highstreet, led by Goldman Sachs Group Inc. (GS) in the event that bids from Berggruen and another private investor, Triton, are rejected.

Berggruen said Highstreet is only likely to make a bid for Karstadt as a "Plan B" option in case an external bid isn't accepted."But they [Highstreet] are a real estate firm, not a consumer goods company. At the end of the day its not logical that they would do so."

Berggruen, whose father was a famous art dealer who fled Nazi Germany, is the billionaire founder and president of Berggruen Holdings. The investment fund is "open to exploring unconventional opportunities and financial structures" ranging from "modest commitments to $100 million in any single transaction," according to its website.

BCBG has recently sought to expand its focus from high-fashion women's wear, launching brands sold at Wal-Mart Stores Inc. (WMT). Last year, BCBG opened six stores in German cities including Berlin, Munich and Cologne.

-By William Launder; Dow Jones Newswires; [phone]; [e-mail]