Federated OKs Macy’s Bid but Campeau to Fight On : $5.25 Billion Offer Plus Stock Swap

Federated Department Stores Inc. announced today that its board has accepted a multibillion-dollar acquisition bid by R. H. Macy & Co. Inc. over a competing offer from Campeau Corp.

But Campeau refused to give up its quest for Federated, the nation’s fifth-largest retailer.

Among’s Federated’s holdings are Bullock’s, I. Magnin and the Ralphs grocery chain.

Federated and Macy signed a definitive agreement to create a new company, Macy’s-Federated Inc., said Jim Fingeroth, a spokesman for Macy, which has nearly 100 department and specialty stores.

The agreement provides for Macy to begin a cash tender offer of $74.50 a share for about 80% of Federated’s 89.6 million outstanding shares, or a total of $5.25 billion, Fingeroth said. The remaining Federated shares would be exchanged for stock in the new company.

Campeau had offered $68 a share in cash for all Federated shares, or $6.1 billion.

Will Proceed With Offer

After the agreement was announced, Campeau said it will proceed with a $66 cash tender offer for Federated.

“Macy’s bid is not competitive and we intend to prevail in the marketplace,” a Campeau statement said. “It is now up to Federated’s shareholders to decide.”

Trading in Federated stock was halted on the New York Stock Exchange before the Federated announcement. After trading resumed, its stock rose 50 cents per share to $67.50.

Macy’s bid came to light Monday as Federated directors met to consider the Campeau offer.

Campeau began its bid Jan. 25, offering $47 a share. The bid was rejected as inadequate, and Campeau sweetened the offer several times before arriving at the $68 bid.

Late last week, Federated officials decided to negotiate an agreement with Campeau, and the Toronto-based developer’s offer was still on the table as the Macy bid was considered.

Macy originally offered $73.80 per share and then increased its bid before the agreement was signed.

Wall Street analysts said Tuesday that the rival bids were attractive for different reasons.

“Campeau is sitting there with cash, and Macy’s walked in the door with some cash but the opportunity for the company to enjoy future growth--as opposed to Campeau’s potential breaking up or dismantling of the company,” said Thomas Tashjian, an analyst with Seidler Amdec Securities Inc. in Los Angeles.

Reference to Allied

He referred to the fact that Robert Campeau sold off most of Allied Stores Corp.’s divisions after he bought the company in December, 1986.

New York-based Macy’s, which is privately held, is the nation’s 10-largest retailer.

A Federated acquisition represents for Macy’s a chance to control some of its major competitors, such as Bloomingdale’s, and to increase its market share at the same time, said Michele Davis of the investment firm Oppenheimer & Co.

“They can position Bloomingdale’s at one price point and Macy’s at another price point such that they don’t compete head-on with each other,” she said.

The deal also would give Macy more outlets for its extensive line of private label merchandise.

Campeau is fighting for Federated because it does not want to lose the opportunity to gain the foothold into major U.S. shopping centers that Federated stores would provide, said Monroe Greenstein, of the investment firm Bear Stearns & Co. Inc.

The agreement between Macy and Federated calls for the new company’s board to include significant representation from the existing Federated board.