May Co., Robinson Chains to Merge as 4th in Nation : Southland Stores Will Be Separate
Associated Dry Goods Corp., which owns the giant J. W. Robinson’s chain in the Southland, has agreed in principle to be taken over by persistent suitor May Department Stores Co. in a stock swap valued at $2.64 billion, the two retailers announced today.
The merger would create one of the nation’s largest retailers, although the merged companies are expected to continue to operate the May Co. and Robinson’s chains separately.
Associated shareholders are to receive 0.86 of a May share for each of their shares, the companies said. Based on the closing price of May’s stock on Tuesday, the value would amount to $64.3925 a share. However, the final value of the deal will depend on the price of May’s stock on the day the merger is completed.
Both Close Lower
May closed at $74.87 1/2, down $3.75, in composite trading Tuesday on the New York Stock Exchange. Associated Dry Goods closed at $62, down $2.12 1/2.
Associated has about 41 million common shares outstanding if all its preferred stock is converted into common stock and all options on its stock are exercised.
The combined sales of Associated and May--about $9.413 billion--would rank the merged company as the nation’s fourth-largest retailer, behind Sears, Roebuck and Co., K mart Corp., and J. C. Penney Co., based on the major retailers’ 1985 sales.
May and Associated had negotiated for days, encountering difficulty in agreeing on how many May shares would be swapped for Associated shares. Associated’s board had rejected two earlier formal offers from May as too low.
FTC Requests Information
On Monday, May said it was complying with a request from the Federal Trade Commission for additional information concerning its earlier hostile $2.4-billion tender offer for Associated. May did not disclose what information the commission wanted.
May launched its $60-a-share cash tender offer for 51% of Associated’s common stock outstanding in late June. The offer, which had been scheduled to expire July 24, was seen as a tactic to pressure Associated into accepting an earlier, friendly $66-a-share stock swap proposal from May with a total value of $2.7 billion.
May said that if it was successful in its tender offer, it would swap each of Associated’s remaining common shares for $60 worth of May securities.
Early Offers Rejected
The directors of Associated voted unanimously to oppose the first two offers as too low but said they still were willing to talk to May. The companies, in an unusual move, made public their bargaining positions over the last week.
Monroe Greenstein, a retail analyst with the investment firm Bear Stearns & Co., said there were potential antitrust problems, in Los Angeles, Pittsburgh and Denver, where the combined company would control 40%, 100% and more than half of the markets, respectively.
The combined company might have to sell pieces of operations, Greenstein said.
Associated earned $119.7 million, or $3 a share, on sales of $4.385 billion in 1985. Its divisions include Lord & Taylor, J. W. Robinson, L. S. Ayres, Goldwaters, and Caldor.
May, with headquarters in St. Louis, earned $235 million, or $5.38 a share, on sales of $5.028 billion last year. In addition to its May department stores, the company operates Venture discount stores and Payless ShoeSource stores.
