May Would Sell Associated Unit if Firms Merge : Retailer’s Agreement Settles Antitrust Suit
Heading off the possibility of prolonged legal action related to its pending merger with Associated Dry Goods, May Department Stores said Wednesday that it has agreed to sell an Associated division in Pittsburgh within two years of the merger’s completion.
The St. Louis-based retailer thus settles an antitrust suit filed three weeks ago by the City of Pittsburgh, Allegheny County and the state of Pennsylvania.
If the merger wins shareholder approval on Oct. 3, May would add Associated’s Joseph Horne division in Pittsburgh to its own Kaufmann’s division, a department store combination that would give May a 100% market share. That possibility prompted Pittsburgh and the other government entities to file suit in federal court to block the merger or to force May to sell one of the divisions.
Amicable Basis Sought
May Chairman and Chief Executive David C. Farrell said “all of the parties concerned believed that it would be in their best interests to put the matter behind us on an amicable and responsible basis.”
He added, “May and the City of Pittsburgh have enjoyed a long and beneficial relationship, and May looks forward to many more years in Pittsburgh.”
Reached at home, Pittsburgh City Solicitor Dan Pellegrini sounded relieved but tired.
“We negotiated the deal until 3:30 a.m. this morning with May’s attorneys,” Pellegrini said. “We believe it addressed the concerns we have, and we hope it was to their mutual satisfaction because we both have to live with each other.”
At one point, he said, the Pittsburgh team hammered out a settlement proposal at a downtown Burger King kept open after hours by the manager.
Chief U.S. District Judge Maurice Cohill signed the agreement in Pittsburgh, saying in open court that it was good for everyone.
The Federal Trade Commission, which is studying the merger for possible antitrust implications, has not yet indicated whether it views the combination as anti-competitive, said May spokesman Jim Abrams.
Sees No Difficulty
“We continue to believe that the merger will withstand all antitrust scrutiny, and that would have gone for Pittsburgh as well,” Abrams said. “We wanted to maintain our long-term, good relationship. The settlement allows all parties to avoid costly, time-consuming litigation.”
Under the agreement, May vowed to use its “best efforts” to maintain the Horne division in good operating condition.
Abrams said May has not set a price for the division or “initiated any activities with respect to the sale” of the division.
William N. Smith, an analyst at Smith Barney, Harris Upham & Co. in New York, said the “Horne division doesn’t mean a heck of a lot” to May. Kaufmann’s, with 18 stores to Horne’s 13, is by far the more productive and profitable. Kaufmann’s posted sales of about $410 million last year, compared to Horne’s $200 million.
