May Co. to Become Sole Owner of Park LaBrea : Will Pay $110 Million in Stock, Cash to Metropolitan Life for Its Interest
May Department Stores Co. said Wednesday that it will pay $110 million in stock and cash to buy Metropolitan Life Insurance Co.’s 50% stake in Park LaBrea, a giant residential and commercial complex co-owned by both companies.
The transaction will make St Louis-based May the sole owner of the largest apartment complex in the city of Los Angeles. It also will make New York-based Metropolitan Life the largest single stockholder in May Department Stores, sparking speculation on Wall Street that the sale could be an attempt by the department store chain to thwart a possible takeover bid by Crown Books Corp.
Two weeks ago, Landover, Md.-based Crown Books and affiliates, including Los Angeles-based Thrifty Corp., said they intended to purchase an undisclosed amount of stock in May Department Stores. Officials at Crown Books have refused to discuss their intentions and would not comment Wednesday on whether Metropolitan’s new 10.4% stake in May Department Stores would sour any plans to increase their estimated 1% holding in the department store chain.
May Department Stores and Metropolitan Life officials insisted that the sale of Park LaBrea makes good business sense for both companies and has nothing to do with Crown Books’ recent stock purchase. The companies said that they began discussing the sale more than a year ago and that it is merely a coincidence that the transaction is expected to be completed within two weeks.
Several Wall Street analysts, however, viewed the timing and structure of the sale as a move to make any thought of a takeover less palatable for Crown Books.
“I view it an as anticipatory and defensive measure, whether anyone admits it or not,” said analyst Robert Simonson of Kidder Peabody & Co. in New York, “both because of the timing and because May company gave Metropolitan voting shares. It could have given debentures.”
On the New York Stock Exchange, May Department Stores shares were off 62.5 cents at $48.375 as 330,000 shares were traded.
May Department Stores said it had no immediate plans to further develop Park LaBrea, a 178-acre complex on Third Street between La Brea Boulevard and Fairfax Avenue that includes a May Co. store, a 90,000-square-foot shopping center and 4,253 apartments.
In exchange for its share in the property, Metropolitan Life, the nation’s second-largest insurance company, will get $10 million in cash and $100 million in voting, non-convertible preferred stock. That will give the insurance company 10.4% of the voting shares in the department store company.
Metropolitan Life also could get up to $30 million in cash, depending on the profitability of the complex during the next few years.
Metropolitan Life said it began building Park LaBrea in 1944 and decided to sell its stake in the complex “as a opportunity to make a return on a long-term investment.” The company said it will not take part in the day-to-day operations of May Department Stores.
May Department Stores said it has owned 50% of Park LaBrea since 1980 and has managed the complex for 12 years.
“This is not a way to avert a takeover (of May Department Stores),” a company spokesman said. “We’ve been talking about it for well over a year and we view it as a good investment opportunity.”
The area surrounding Park LaBrea is undergoing a renaissance, including restoration of the nearby Pan Pacific Auditorium.
Plans include adding two film theaters, a video theater and multimedia performance lab, a medium-size hotel and retail and office space.
In addition to Thrifty, parent of the Thrifty Drug chain, affiliates of Crown Books interested in the May stock purchase include Dart Group Corp., Trak Auto Corp., Combined Properties Limited Partnership, Herbert H. Haft and Gloria G. Haft. Herbert Haft is chairman of both Dart Group and Crown Books.
Thrifty and Dart Group each own 34% of Crown Books. Trak Auto is a subsidiary of Dart Group.
