Deal near on merging 2 retailers


NEW YORK -- Top executives of R. H. Macy & Co. and Federated Department Stores Inc. have agreed on a merger that would create one of the nation's largest department store chains.

Negotiators said the agreement was still subject to working out several final details and stressed that the deal could still fall apart. But both sides are optimistic that, after seven months of courtship by Federated, the two companies may reach a successful conclusion, perhaps by the end of the week. Macy has scheduled a special board meeting today to discuss the agreement.

While the two sides continue to huddle over final issues, the goal now is for the two companies to file a plan together to get Macy out of bankruptcy. "That's a fair description of what's going on, although we're not entirely home free yet," said one person close to the negotiations.

When terms of the merger are complete, Macy and Federated will file a reorganization plan in bankruptcy court. Hearings will be held to discuss and fine-tune the plan. It will have to meet creditors' approval, but most of them already support a merger.

The remaining sticking points include one group of Macy's creditors, its bondholders, who still must sign off on a merger agreement. But they are close to backing it.

Also, the Federal Trade Commission and New York state officials have questions about whether the combination would create a monopoly in some markets.

Wrangling is still going on about whether to use Federated or Macy's merchandising system and what stores will be closed or sold. And there is always the remote possibility that a white knight could ride in with an offer to keep Macy independent.

The merger will probably result in few changes that would be visible to most shoppers. But it will create a national retailing empire with 460 stores, sales of $13.5 billion and some of the best-known names in U.S. retailing. In addition to the nationally known Macy's and Bloomingdale's, the company would include regional fixtures such as Burdines, Goldsmith's and Rich's in the Southeast and Bullock's in the Southwest.

The merged company may decide to pass savings along to customers that it realizes from its bigger buying clout, but it may need those savings to offset the merger's costs.

In some parts of the country, Federated may choose to capitalize on the power of the Macy's name and convert some of its regional stores into Macy's stores.

And Federated customers may eventually find an increased selection of private-label merchandise as the combined company takes advantage of Macy's large, experienced product development unit.

Macy's agreement to a combination with Federated was the denouement of a drama that has kept merchants and customers on the edge of their seats since early January, when Federated made its surprise bid to wed its rival.

It is also the end of a purely New York institution. While Macy's will no doubt retain its identity as the best of the city's own distinctive brand of retailing -- brash, daring, slightly overblown and fiercely independent -- it will now be ruled from Federated's Cincinnati base by corporate managers known for their skills in running department store chains that cater to regional tastes.

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