FRANKFURT, July 26 (Reuters) - German retailer Metro (MEOG.DE) is examining alternatives to the option of formally merging its department store chain Kaufhof with that of Karstadt, a German magazine said on Sunday 26 July.

Photo: www.metro-cc.com

One possible alternative is that once Karstadt goes into bankruptcy, Metro would then rent the property where some selected Karstadt stores are located directly from the real estate owner Highstreet consortium, Focus said, citing company sources.

Highstreet is led by Goldman Sachs (GS.N), Deutsche Bank (DBKGn.DE) and Pirelli Real Estate.

Karstadt has 89 department stores and 27 sporting goods outlets.

A spokesman for Metro told Reuters the company remained interested in acquiring the bulk of Karstadt's stores but had not decided on any option. "We are examining all the technical and legal possibilities," he said.

The report said Metro would not directly acquire the Karstadt stores but would instead absorb the goods, contracts, and employees of the stores on a case-by-case basis, depending on internal growth figures.

The option of a formal merger between Kaufhof and Karstadt, which is owned by insolvent Arcandor (AROG.DE), would run into difficulties with antitrust authorities, Focus said.

(Reporting by Marilyn Gerlach and Kathrin Schich, editing by Will Waterman)