If At First You Don’t Succeed, Try and Merge Again
By George Anderson
It’s déjà vu all over again. Two years after being unable to complete a deal that would have united the two largest U.S. department store chains under a single corporate banner, Federated and May Department Stores now appear ready to make an agreement.
The first deal, it was reported at the time, was scuttled over a disagreement over who would run the company. That issue, it appears, has suddenly become a non-issue with last Friday’s removal of Gene Kahn as chairman and chief executive of May.
While news reports suggest a deal is imminent, a deal with Federated at this point might not be in the best interests of May’s shareholders. A report in the New York Times points out May would be likely to get more in a deal if it had a new CEO running the company and a turnaround (or at least a plan to start one) in place.
There has also been speculation that Federated might not be interested in all of May but the part of it that got away. There has been speculation that Federated may seek to pry Marshall Field’s away from the May fold.
The two companies were thought to be the main competitors for the department store when it was put on the block by Target Corp and eventually bought by May for $3.2 billion. Federated, if a bid was to be made for Field’s, would likely offer less than May’s purchase price. The company’s directors, it has been widely reported, believed May’s bid to acquire the iconic Chicago department store was excessive.
Moderator’s Comment: Do you see a merger or some form of sale arrangement being made by Federated Department Stores for the whole or part of May Department
Stores? What will further consolidation within the department store ranks mean for the industry as a whole?
The New York Times’ report and others we’ve seen have also raised the possibility that Federated might have an interest in pursuing Saks Fifth Avenue
or another upscale department store business. The luxury segment of the department store industry was among the big sales winners this past holiday season. –
George Anderson – Moderator