May, Penney make a competing bid for Woodies chain


In a clash of retailing giants, May Department Stores Co. and J. C. Penney Co. have made a joint bid to acquire Woodward & Lothrop Inc., countering an offer for the Alexandria, Va.-based chain by Federated Department Stores.

Under the deal, announced yesterday, the sale of Woodies' assets would bring in $704 million in gross proceeds, $64 million more than Federated's proposal.

Woodies, operating under bankruptcy court protection since January 1994, was subject to counter bids until today under bankruptcy court order, which also required that competitors submit bids at least $30 million higher than Federated's.

With a day to spare, May and Penney officials were confident that they had prevailed, asserting that their bid provides $409 million in net value that would be distributed to Woodies creditors -- $58 million more than Federated's $351 million offer.

"It's clearly a higher bid both in terms of net distributable value and providing employment," said May spokesman Jim Abrams. "We feel it's a good investment for May and its shareholders, and we expect it to bring excellent returns."

Responded Federated spokeswoman Mary Ann Shannon: "Federated has no comment at this point."

At least one analyst wasn't prepared to pronounce the winner: "We just have to wait and see what happens," said Sally Wallick, an analyst with Legg Mason Wood Walker Inc.

May would retain about 7,000 employees of Woodies and its department store subsidiary, John Wanamaker, while Federated reportedly would keep about 5,000 employees. May would offer positions to 3,900 employees at two of its main chains -- Hecht's and Lord & Taylor -- after the deal is closed, then stagger the rest over the following 12 months. Penney would not retain Woodies employees, but after a six to nine month renovation, the company would hire more than 1,000.

Under the terms of the May-Penney proposal, St. Louis-based May department stores would acquire three Woodies stores in the Washington, D.C., area: at Chevy Chase, which would be converted into a Hecht's, and at Fair Oaks and Lake Forest malls, both of which would become Lord & Taylor department stores.

That would bolster May's already dominant position in the Maryland-D.C. region, where it operates 23 Hecht's and four Lord & Taylor department stores.

May would also acquire the Woodies distribution center in Baltimore and 13 Wanamaker stores in the Philadelphia area, converting them into Hecht's department stores. That includes the flagship Wanamaker store in Center City, the company said, provided May can negotiate a lease agreement with the building's owner.

J. C. Penney's part of the May deal would include the acquisition of seven Woodies' in the D.C-Baltimore area: The Mall in Columbia, Landmark Shopping Center, Landover Mall, Montgomery Mall, Tysons Corner Center, Prince Georges Plaza and Wheaton Plaza.

"It gives us a much stronger position in the Washington-Baltimore area," said Henry J. Rusman, a spokesman for Penney, which operates 14 stores in the Baltimore-Washington market.

The Woodies in White Marsh would be sold to an unidentified third party -- another department store company. That would leave four Woodies stores, including one in the Baltimore area, Annapolis, out of the proposal. Leftover Woodies properties would be sold or liquidated.

Under the Federated deal, 10 of Woodies' 15 department stores would be acquired, including all three in the Baltimore area as well as the lease on the Baltimore distribution center.

The Wanamaker chain would be divvied among four parties, with six stores going to Strawbridge & Clothier of Philadelphia, two to Boscov's Department Stores Inc. of Reading, Pa., and five to the Rubin Organization, a Philadelphia-based real estate developer. Federated would acquire the flagship Wanamaker department store in downtown Philadelphia and convert it into a Macy's.

Hearings will be held in bankruptcy court in New York in early August to determine the winner.

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