* German Federal Cartel Office approves merger
* Says market share exceeds 25 pct in only a few categories
* Deal combines HBC's Kaufhof with Signa's Karstadt (Recasts with regulatory approval)
BERLIN, Nov 9 (Reuters) - Germany's antitrust regulator on Friday approved the planned merger of department store chains Kaufhof and Karstadt, owned by Canada's Hudson's Bay Co (HBC) and Austria's Signa Holding.
The deal will create a group with 243 department stores in Germany, Belgium and the Netherlands and annual sales of 5.4 billion euros ($6.13 billion).
What will become Europe's third biggest department store chain faces stiff competition from e-commerce players such as Amazon and online fashion retailer Zalando, something the regulator noted in its decision which weighs whether merged companies would dominate their market.
"We found that Kaufhof and Karstadt have a market share of more than 25 percent in only a few categories of goods and regions... In addition, online retailers are an important alternative for a rapidly growing number of consumers in most categories of goods," Cartel Office President Andreas Mundt said in a statement.
Several people familiar with the matter told Reuters late on Thursday that the cartel office was poised to approve the deal.
Signa will hold a 50.1 percent stake in the combined company and take the strategic lead on the business' board.
$1 = 0.8816 euros Reporting by Matthias Inverardi; writing by Tassilo Hummel; editing by Jason Neely, Maria Sheahan and Kirsten Donovan