Ian Ritter is national online editor for GlobeSt.com/RETAIL.
CINCINNATI-Federated Department Stores and May Department Stores, two of the biggest players in their sector, are merging in an $11-billion deal. The combined companies, to be controlled by Federated management, which is based here, will operate just over 950 department stores across the country. May is headquartered in St. Louis.
The deal will bring such heralded department store chains, such as Lord & Taylor, Macy's and Marshall Field's, under one ownership. Federated, which is converting its regional department-store chains into Macy's units this year, will also do so with a portion of the May portfolio, says Terry J. Lundgren, Federated's chairman, CEO and president.
Federated will assume $6 billion in May debt as part of the transaction. May shareholders will receive $17.75 per share in cash as well as 0.31 shares of Federated. Completion of the deal hinges on regulatory and shareholder approval. Officials at the companies expect to close the merger in the third quarter.
Federated will enter 15 new states as a result of the acquisition and have stores in 64 of the country's top 65 markets. "We will be better able to meet competitive challenges in the retail marketplace and better able to realize growth opportunities over the longer term," says Lundgren in a statement, adding that the combined companies should lead to stronger same-store sales increases.
The deal has been one of the worst-kept secrets in the industry so far this year. Published reports and analysts have speculated about the merger in a time of increased consolidation by retail companies. Kmart and Sears are merging in an $11-billion deal that is set to close in March. Jones Apparel acquired Barneys in a $400-million transaction last year. And last year May bought Marshall Field's for $3.2 billion from Target, which also sold its Mervyn's chain to a group of private investors for $1.2 billion.
Federated operates about 450 stores, in the Macy's and Bloomingdale's chain, as well as regional department stores that will become Macy's by March 6. May's 491 department stores are under the names of Famous-Barr, Filene's, Foley's, Hecht's, Kaufmann's, Lord & Taylor, L.S. Ayres, Marshall Field's, Meier & Frank, Robinsons-May, Strawbridge's and the Jones Store. May also owns 239 David's Bridal stores, 449 After Hours Formalwear stores and 11 Priscilla of Boston stores.
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