Federated in talks to buy May Department Stores, Wall Street Journal reports

Thursday, January 20th 2005, 12:52 pm
By: News On 6

NEW YORK (AP) _ Federated Department Stores is in talks to acquire May Department Stores, which would create a retailer with nearly 1,000 stores, including Bloomingdale's, Macy's and Lord & Taylor, the Wall Street Journal reported Thursday.

The Journal, citing unidentified sources, said Thursday that talks between Federated and May have been on and off for some time and the resignation last week of May's chairman, Gene Kahn, could clear the way for a deal. The story cautioned, however, that there is no guarantee a deal will be reached.

Cincinnati-based Federated has 459 stores, including Bloomingdale's and Macy's, while St. Louis-based May operates about 500, including Marshall Field's and Lord & Taylor. A merger would create a retailer with $30 billion in combined sales.

May shares rose $2.36, or 7.5 percent, to $33.73 in early afternoon trading on the New York Stock Exchange, after surging nearly 12 percent. Federated shares fell $1.62, or 2.8 percent, to $55.46.

Federated's spokeswoman Carol Sanger and May spokeswoman Sharon Bateman both declined to comment.

The report comes as U.S. retailers try to reduce costs and increase outlets in an effort to compete with industry leader, Wal-Mart. Last fall, Kmart agreed to buy Sears, Roebuck for $11.5 billion.

Federal antitrust regulators are expected to examine any deal between Federated and May to determine if it would restrict competition.

The companies would probably save money by combining, but would not control too much of the market because rival retail giants exist, said Jeffrey R. Stinson, an analyst with FTN Midwest Research in Cleveland.

But Dan Hess, president of Merchant Forecast, a New York-based research company, said the merger would likely reduce choices for customers without significantly reducing the prices the companies already get from vendors.

``I don't think it is a good thing for either company. And it's not good for the consumer,'' he said.

Rival retailers like Target and Wal-Mart could also benefit from real estate opportunities in markets where the two department stores overlap, Hess said.