CINCINNATI, NEW YORK & ST. LOUIS, Feb 28, 2005 (BUSINESS WIRE) -- Federated Department Stores, Inc. (NYSE:FD) and The May
Department Stores Company (NYSE:MAY) today announced that they have
entered into a merger agreement.
Pursuant to the transaction, each share of May will be converted
into the right to receive $17.75 per share of cash and 0.3115 shares
of Federated stock. Based on the 10-day trading average of Federated
stock as of Friday, February 25, 2005, this equates to a value per
share of $35.50, or $11 billion in total equity value. In addition,
Federated will assume May debt that was approximately $6 billion at
year-end, for a total consideration of approximately $17 billion.
As part of this transaction, Federated has committed to increase
its annual dividend to $1 per share.
The deal, which was approved by the boards of directors of both
companies yesterday, will establish Federated as a $30 billion
national retailer whose economies of scale and scope of operations -
stores in 49 states, Guam, Puerto Rico and the District of Columbia -
will enable it to compete more effectively in the highly competitive
"This is truly an exciting day in American retailing," said Terry
J. Lundgren, Federated's chairman, president and chief executive
officer. "Today, we have taken the first step toward combining two of
the best department store companies in America, creating a new retail
company with truly national scope and presence."
Completion of the deal is contingent on regulatory review and
approval by the shareholders of both companies, a process that is
expected to take several months. The transaction is expected to close
in the third quarter of 2005.
Once consummated, Federated will operate more than 950 department
stores, along with approximately 700 bridal and formalwear stores. In
addition, 15 new states, mostly in the nation's heartland, will be
layered onto Federated's existing 34-state operating base, with
relatively little overlap between the companies' locations. As a
result, Federated for the first time will have a truly national retail
footprint, with stores in 64 of the nation's top 65 markets.
Lundgren said that this transaction is expected to be accretive to
Federated's earnings per share in 2007. Federated expects to realize
approximately $450 million in cost synergies by 2007, resulting from
the consolidation of central functions, division integrations and the
adoption of best practices across the combined company. In addition,
the company anticipates approximately $1 billion in one-time costs
related to the acquisition and integration, spread out over a
three-year period beginning in 2005.
"In today's retail environment, competition comes from every
conceivable retail format. To succeed, we have to operate more
efficiently and compete more effectively against players at all levels
of the retail demographic," said John Dunham, May's president and
acting chairman and chief executive officer. "There is no question
that this is a bold and exciting move, and one I believe will have a
positive impact on competitive retailing for American consumers in the
Federated said that while it intends to merge May's St. Louis
corporate headquarters functions into its own Cincinnati and New York
corporate offices, beginning this year, its intention is to make St.
Louis the headquarters of one of the major operating divisions going
forward in order to take advantage of the considerable talent pool
that exists there. Federated also said it intends to honor May's
extensive philanthropic commitments to the communities in which it
operates, and to continue that practice.
While no division consolidations or store name changes are planned
before 2006, Federated said it is likely that most of May's regional
department stores ultimately will be converted to Macy's.
"We have had considerable success in re-branding our own regional
stores as Macy's, so obviously we anticipate continuing this strategy
to some extent with our new stores," Lundgren said. "Operating
regional stores primarily under one brand means we can advertise
nationally, unlike regional retailers, which is more cost-effective.
It also means that cause-marketing programs such as Macy's 'Go Red for
Women' campaign, which benefits the American Heart Association, can be
promoted nationally, making them more impactful for the causes they
Among the benefits to customers arising from the acquisition,
Lundgren cited the capacity to lower costs through synergies; the
ability to engage in national marketing initiatives; the potential to
expand the private brand merchandise lines of both companies; a
rollout of Federated's successful reinvent initiatives to May's
department stores; and the ability to expand customer loyalty programs
and offer bridal and gift registries to a national customer base.
"For the customers of both companies, joining together means we
will be better able to offer value and an improved retail experience,
from better assortments and merchandise selections to more competitive
pricing and service," Lundgren said. "For shareholders and employees,
joining together means we will be better able to meet competitive
challenges in the retail marketplace and better able to realize growth
opportunities over the longer term. And for the communities we serve,
joining these companies together means additional opportunities for
cause-marketing promotions and expanded involvement in initiatives
that facilitate our giving back in a meaningful way to the places our
customers and employees live and work."
Lundgren said the combination of these two companies is expected
to lead to accelerated same-store sales growth. "We expect the sales
of the combined company to grow faster as a result of certain changes
we would make, including introducing the best of Federated's and May's
private brands into each other's stores and rolling out our reinvent
initiatives to May stores."
"It will take us until mid-2007 to implement all of the changes we
would anticipate as a result of this acquisition, and we intend to
take the time necessary to do it right," Lundgren said. "Our first
priority is to continue to execute in all of our stores this year,
while we focus behind the scenes on consolidating corporate and
Federated was advised by and received a fairness opinion from
Goldman, Sachs & Co. In addition, Federated also received financial
advice on certain matters pertaining to the merger from Credit Suisse
First Boston LLC. Jones, Day provided legal advice to Federated.
May was advised by Morgan Stanley Dean Witter, Inc. and received a
fairness opinion from Peter J. Solomon Company, Limited. Skadden Arps
provided legal advice to May.
Stockholders are urged to read the joint proxy
statement/prospectus regarding the proposed transaction when it
becomes available, because it will contain important information.
Stockholders will be able to obtain a free copy of the joint proxy
statement/prospectus, as well as other filings containing information
about Federated and May, without charge, at the SEC's Internet site
(http://www.sec.gov). Copies of the joint proxy statement/prospectus
and the filings with the SEC that will be incorporated by reference in
the joint proxy statement/prospectus can also be obtained, without
charge, by directing a request to Federated, 7 West Seventh Street,
Cincinnati, Ohio 45202, Attention: Office of the Secretary, or to May,
611 Olive Street, St. Louis, Missouri, 63101, Attention: Office of the
The respective directors and executive officers of Federated and
May and other persons may be deemed to be participants in the
solicitation of proxies in respect of the proposed transaction.
Information regarding Federated's directors and executive officers is
available in its proxy statement filed with the SEC by Federated on
April 15, 2004, and information regarding May's directors and
executive officers is available in its proxy statement filed with the
SEC by May on April 22, 2004. Other information regarding the
participants in the proxy solicitation and a description of their
direct and indirect interests, by security holdings or otherwise, will
be contained the joint proxy statement/prospectus and other relevant
materials to be filed with the SEC when they become available.
This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
statements include, but are not limited to, statements about the
benefits of the business combination transaction involving Federated
and May, including future financial and operating results, the new
company's plans, objectives, expectations and intentions and other
statements that are not historical facts. Such statements are based
upon the current beliefs and expectations of Federated's and May's
management and are subject to significant risks and uncertainties.
Actual results may differ materially from those set forth in the
forward-looking statements because of a variety of factors, including:
the ability to obtain governmental approvals of the transaction on the
proposed terms and schedule; the failure of Federated and May
stockholders to approve the transaction; the risk that the businesses
will not be integrated successfully; the risk that the cost savings
and any other synergies from the transaction may not be fully realized
or may take longer to realize than expected; disruption from the
transaction making it more difficult to maintain relationships with
customers, employees or suppliers; transaction costs associated with
the renovation, conversion and stores, manufacturers' outlets,
off-price and discount stores, and all other retail channels; and
general consumer-spending levels, including the impact of the
availability and level of consumer debt, and the effects of weather.
Additional factors that could cause Federated's and May's results to
differ materially from those described in the forward-looking
statements can be found in the 2003 Annual Reports on Forms 10-K of
Federated and May filed with the SEC and available at the SEC's
Internet site (http://www.sec.gov).
About Federated: 111,000 employees in 34 states. Founded 1929,
headquartered in Cincinnati, OH, with corporate offices in Cincinnati
and New York. Federated currently operates more than 450 stores in 34
states, Guam and Puerto Rico under the names of Macy's,
Bloomingdale's, Bon-Macy's, Burdines-Macy's, Goldsmith's-Macy's,
Lazarus-Macy's and Rich's-Macy's. The company also operates macys.com
and Bloomingdale's By Mail. Federated is converting all regional
department stores to Macy's brand effective March 6, 2005. Annual
sales: $15.6 billion.
About May: 132,000 employees in 46 states. Founded 1910,
headquartered in St. Louis, MO. At the end of the fiscal 2004, May
operated 491 department stores under the names of Famous-Barr,
Filene's, Foley's, Hecht's, Kaufmann's, Lord & Taylor, L.S. Ayres,
Marshall Field's, Meier & Frank, Robinsons-May, Strawbridge's, and The
Jones Store, as well as 239 David's Bridal stores, 449 After Hours
Formalwear stores, and 11 Priscilla of Boston stores. May currently
operates in 46 states, the District of Columbia, and Puerto Rico.
Annual sales: $14.4 billion.
-- There will be a live webcast of a call with investors and
analysts beginning at 10 a.m. ET today. This call can be
accessed through the Federated website, or by dialing in at
1-800-659-4363 to listen to the broadcast in real time.
Pre-registration is requested. The webcast will be archived
for replay beginning approximately two hours after the
conclusion of the live call.
-- In addition, a press conference to discuss today's
announcement will be held beginning at 11 a.m. at the Rihga
Royal Hotel, 151 West 54th Street, New York City. Excerpts
from that press conference will be taped and made available
via satellite uplink later this afternoon. A media advisory
with instructions for accessing that satellite feed will be
issued via Business Wire later today as well.
-- Additional information on Federated is available on the
Internet at www.fds.com/pressroom and additional information
on May is available at www.mayco.com.
SOURCE: Federated Department Stores Inc.
For Federated Department Stores, Inc.
Carol Sanger, 513/579-7764 (Media)
Susan Robinson, 513/579-7780 (Investor)