Limited’s First Bid Heralded Takeover Spree in Retailing
Leslie H. Wexner may have been ahead of his time 2 1/2 years ago--but only slightly.
Carter Hawley Hale Stores, the Los Angeles-based retailer, was the only takeover target in its industry in 1984 when it was aggressively pursued by Wexner and his company, the Limited.
Since then, however, it’s been nothing short of takeover mania in the retailing business. Many of the most famous names in retailing now have new owners. Among them are Macy’s, Lord & Taylor, J. W. Robinson, Brooks Bros. and Zale.
Other retailers have been bought up by their management in deals that left them saddled with debt. Some have staved off takeover threats but may still be vulnerable.
A key attraction of retail companies, analysts say, is their vast real estate holdings. Land, buildings and store leases are considered to be worth far more than their value as stated on corporate books. As the number of potential locations for new stores has decreased, the value of existing store properties has risen.
“It’s not just the real estate,” said Stuart M. Robbins, a retail analyst with Donaldson, Lufkin & Jenrette in New York. “It’s all the assets, the inventory, receivables and basic franchises of the (retail) names. It’s all those things put together.”
Despite the wave of retail takeovers, analysts say, the stock prices for retail firms don’t reflect their true values. “The average company is selling at one-third below its breakup value,” Robbins said.
Real estate experts such as Edward J. DeBartolo Sr., who has joined Wexner in his bid for Carter Hawley, also believe that retailers aren’t using their space efficiently. About one-third of retailers’ area devoted to selling their goods “doesn’t make any money,” Robbins said.
The perceived opportunities have drawn buyers in droves:
- Toronto real estate developer Campeau Corp. several weeks ago succeeded in outbidding DeBartolo by paying $3.56 billion for Allied Stores, which operates 17 department stores and such specialty chains as Bonwit Teller, Brooks Bros. and Ann Taylor.
- May Department Stores, which operates May Co. in Southern California, this October acquired Associated Dry Goods, parent of Robinson’s and Lord & Taylor, in a stock swap valued at $2.5 billion.
- Pacific Lighting this May acquired Thrifty Corp., which operates the largest chain of drug and discount stores in California, in a stock swap valued at $885 million.
- Zale Corp., the world’s largest jeweler, Tuesday accepted a $550-million buyout offer from Toronto-based Peoples Jewellers Ltd. and its partner, Swarovski International Holding, a Zurich-based manufacturer of jewelry and crystal.
Other retail companies have turned to management buyouts. Executives of R. H. Macy, the nation’s 10th-largest retailer, borrowed against the chain’s assets to buy the firm in a buyout worth $3.58 billion. And the New York investment firm of Kohlberg Kravis Roberts & Co. is completing a $4.9-billion buyout with management of Safeway Stores, the world’s largest supermarket operator.
Some retailers, however, have fended off challengers--but at a steep price and perhaps only temporarily. Last week, Federated Department Stores, parent of Bullock’s and Ralphs, helped to squelch a possible takeover when it paid $195 million to buy back 2.2 million of its shares from “a single holder,” reportedly the Dart Group, which is controlled by Herbert Haft and his son, Robert. The Limited vs. Carter Hawley Hale For the second time in 2 1/2 years, the Limited is making an unsolicited offer for Carter Hawley Hale, parent of the Broadway, Neiman-Marcus and other stores. In this round, the Limited, an Ohio-based retailer, has enlisted a major mall developer as partner. Still in question is the role of General Cinema, which rode to Carter Hawley’s rescue in 1984 and now holds a 39% stake in the company.
