Federated Department Stores Inc. completed its $11 billion purchase of May Department Stores Co. Tuesday and said it will sell an additional seven stores in California, New York and Massachusetts next year, bringing the total to 75.
Federated will close two stores in New York, one in Massachusetts and four in California, the Cincinnati-based company said in a statement. The stores now operate under the Filene's, Macy's or Lord & Taylor names. Federated will also sell a Filene's or Macy's East store in downtown Boston.
Chief Executive Terry Lundgren is selling stores and expanding the Macy's brand as Federated becomes the second-largest department-store operator in the U.S. with the May acquisition. The divestitures will begin next year and include locations with 2004 sales of about $2.1 billion.
The Federal Trade Commission concluded its examination of the transaction and its deadline to object to the deal expired at midnight, Federated spokesman Jim Sluzewski said Tuesday.
Shares of Federated closed down $1.18 at $69.48 on the New York Stock Exchange. May, which fell 5 cents to $39.75 Monday, was delisted Tuesday morning.
Under the terms of the merger agreement, May shareholders will receive $17.75 in cash and 0.3115 shares of Federated common stock for each share of May common stock.
Between the Feb. 28 date when the deal was announced and the Federated closing share price yesterday, the value of the $35.50 cash and stock offer rose by about $3.50 a share, Sluzewski said. Federated is also assuming $6 billion in May debt.
Federated will divest the Filene's in Hyannis, Mass.; Lord & Taylor stores in Huntington Station and Bay Shore, N.Y.; Macy's West stores in Newport Beach, Simi Valley and Westminster, Calif.; and a Macy's West men's and home store in Woodland Hills, Calif.
On July 28, the company announced it planned to sell or close 68 stores and that it would convert 330 May stores to Macy's. It said it wouldn't convert 57 Lord & Taylor stores and that it hadn't made a decision about 60 Marshall Field's stores.
It isn't known exactly when that transition will affect Utah's eight Meier & Frank stores (along with one David's Bridal), a May Department Stores spokeswoman said last month. Federated also did not disclose its strategy for rebranding its new stores — how it will introduce Utahns to the Macy's concept, market its products and create its own footprint.
Federated reiterated Tuesday that there will be no job cuts before March 1, 2006. The company said the "vast majority" of employees from the affected stores will be offered positions at other Macy's or Bloomingdale's locations.
A dividend of 25 cents per share will be paid on Oct. 3 to Federated shareholders of record as of Aug. 29. A dividend of 24.5 cents will be paid on Sept. 15 to May shareholders of record on Aug. 29.
Federated is purchasing the ailing smaller retailer in part to transform Macy's into a national presence. Lundgren intends to boost sales of private-label merchandise and upscale goods such as $200 Coach handbags, and will gain buying power to compete with discounters such as Target Corp. and luxury retailers including Neiman Marcus Group Inc.
Federated has had an average monthly same-store sales gain of 1.5 percent so far this year. May has had a 3.6 percent decline. In July, they posted declines of 0.9 percent and 3.3 percent, respectively, compared with a 5.5 percent increase at Target, a 3.9 percent rise at Neiman Marcus, and a 22 percent jump at teen apparel retailer Abercrombie & Fitch Co.
The combined company will operate about 1,600 stores, including about 730 Macy's in almost every major U.S. market, and have sales of about $30 billion.