Posted on: Tuesday, March 1, 2005
Federated to buy May for $11B
By Rachel Katz and Dan Lonkevich
Bloomberg News Service
NEW YORK — Federated Department Stores Inc., the owner of Macy's and Bloomingdale's, agreed to buy May Department Stores Co. for $11 billion to become the second-biggest U.S. department-store company.
Bebeto Matthews • Associated Press Federated Chief Executive Terry Lundgren will run the new company with more than 1,600 stores and $31.2 billion in sales, second only to the soon-to-be-combined Kmart Holding Corp. and Sears, Roebuck & Co.
"It's all about scale," said John Zielinski, who helps manage about $82.9 billion at Chicago-based Neuberger Berman, which owns Federated and May shares. "The more scale you can bring if you're a buyer of goods, the better position you're in to negotiate with vendors."
In Hawai'i, Federated operates 11 stores under the Macy's brand, seven on O'ahu, two on the Big Island, one on Kaua'i, and one on Maui. May doesn't operate any stores in Hawai'i.
The purchase allows Federated to save $450 million by 2007 as department stores get squeezed by discounters including Wal-Mart Stores Inc. and luxury chains.
May's comparable sales declined 2.4 percent in 2004, and Federated's rose 2.6 percent.
The acquisition is the biggest in U.S. retail history if debt is included in the total value, according to Bloomberg data. The deal catapults Federated over J.C. Penney Co. as the No. 2 U.S. department-store company.
Federated will pay $35.50 in cash and stock for each May share and assume $6 billion in debt, the companies said in a statement yesterday.
The Macy's in New York's Herald Square is billed as the world's largest store. Macy's itself will get bigger as owner Federated acquires May Department Stores Co. in a deal worth $11 billion.
