German department store chain Karstadt Friday was saved from the brink of insolvency after an Essen court approved a takeover plan for the retailer signed by billionaire investor Nicholas Berggruen and the store's creditors.

The Essen district court approved Berggruen's takeover plan for Karstadt Friday afternoon, eliminating the final legal hurdle in a months-long saga by Berggruen to acquire Karstadt. Berggruen and Karstadt's creditors had failed to reach a formal agreement before a Friday deadline set by the insolvency administrator, but collected the final signatures needed to close the deal Friday morning.

The iconic German retailer, a unit of bankrupt holding company Arcandor AG (ARO.XE), risked being shuttered by its insolvency administrators if a deal wasn't finalized by the end of the week. The company employs more than 25,000 staff around Germany and has stirred public sentiment across the country in recent months amid fears of lost jobs and the potential demise of a prominent national brand.

German-American investor Berggruen has since June haggled over the terms of his deal with creditors ranging from Germany's Valovis Bank to Highstreet, a real estate consortium headed by Goldman Sachs Group (GS) which owns 86 of the 120 Karstadt properties.

The negotiations have centered on reductions to Karstadt property rents and plans to reorganize Karstadt into separate units including sport and premium stores. Berggruen has said he won't spin off any unit before 2012.

Berggruen has committed to inject EUR70 million to keep the department store chain running.

He also plans a partnership with U.S. clothing designer BCBG Max Azria Group aimed at improving Karstadt's merchandising and fashion selection.

-By Archibald Preuschat and William Launder, Dow Jones Newswires; +49(0)6929725515; archibald.preuschat@dowjones.com