May Stores Would Purchase Two Divisions if Campeau Bid for Federated Succeeds

May Department Stores on Friday bolstered the efforts of a Canadian real estate developer to take over a retailing rival, Federated Department Stores.

The St. Louis-based parent of May Co. California and Robinson’s agreed to pay between $1.3 billion and $1.5 billion for two Federated units--Filene’s in Boston and Foley’s in Houston--should Campeau Corp. win Federated.

Campeau is fighting an uphill battle because Federated’s board agreed Wednesday to a takeover by R. H. Macy & Co. in a deal valued by analysts at about $6.1 billion.

Federated also owns Bullock’s department stores, Ralphs supermarkets, Bloomingdale’s and I. Magnin.

On top of Campeau’s earlier conditional deal to sell Brooks Bros. for $770 million to Marks & Spencer of Britain, the agreement with May increased confidence among Wall Street observers that the Toronto developer could secure financing for the deal. It also deals up front with potential antitrust problems in New England, where Campeau operates the Jordan Marsh chain.

Campeau Has Funding

“This puts a heck of a lot of pressure on the board (and) on Macy’s,” one Wall Street source said. He gave Robert Campeau, the Canadian firm’s chairman, 60-40 odds “because of his tenacity.”

Analyst Joseph C. Ronning of the Brown Bros. Harriman & Co. investment firm in New York said the agreement “obviously strengthens Campeau’s hand to some extent by showing he does have more financing available to him.”

Campeau said last week that he also has secured funding commitments from First Boston Corp.; Edward J. DeBartolo Corp., an Ohio developer; Olympia & York Developments, a Campeau shareholder based in Toronto; Bank of Montreal and Banque Paribas.

“From a strategic point of view,” Ronning added, “it’s a very good fit for May.”

Under the deal, May would buy 19 Filene’s stores in New England that employ about 7,000 people and 39 Foley’s stores in the Southwest with about 15,000 employees. In 1986, Filene’s had sales of $390.8 million and Foley’s had sales of $1.1 billion. Federated’s Filene’s Basement chain is not included in the deal.

The agreement would give May a bigger presence in parts of the country where it now has few stores, analysts said. May runs the nine-store G. Fox department store chain in southern New England and has seven Lord & Taylor specialty stores in Texas, but no traditional department stores. “We have no stores in the major markets represented by those two divisions,” May spokesman Jim Abrams said.

Calls Suitor Desperate

Interestingly, takeover speculation about May Department Stores has surfaced in recent days. Analysts have viewed it, too, as vulnerable in the reactivated merger wave on Wall Street.

Robert Campeau also sought Friday to ease concerns that he would sell off many Federated divisions, as he did with Allied Stores after buying that company in late 1986. Campeau said he has no plans to sell any department store divisions other than Filene’s and Foley’s should his bid succeed.

But a source close to Macy’s said the conditional sale agreement “is an indication of how desperate Mr. Campeau is to finance this deal by stripping out asset after asset after asset. This gives you some indication of what he will do if he could own this company.”

Reminded that Campeau has vowed not to sell other divisions, the source said: “Right, and I have a date with Raquel Welch in 30 seconds.”

Campeau is proceeding with a tender offer for Federated even though the Cincinnati-based company has agreed to be bought by Macy’s in a cash and stock deal valued by analysts at $6.1 billion.

Macy’s is offering $74.50 per share, or a total of $5.25 billion, for 80% of Federated’s 88.5 million outstanding shares. The rest of Federated’s shares would be swapped for stock in the merged company, Macy’s/Federated Inc.

Has Rights Plan

Campeau’s offer would pay $75 per share in cash for 80% of Federated’s shares and $44 a share for the rest after a merger. The company said the offer has a total value of about $68 a share.

Wall Street observers still gave Macy’s the inside track for a number of reasons. Federated’s board has already accepted the deal and said it considered the offer to be worth more than a short-lived proposal by Campeau to pay $69.50 a share in cash.

Moreover, Federated has a shareholder rights plan, known in Wall Street parlance as a poison pill, that would allow Federated shareholders to buy shares at half price if a hostile suitor acquired a certain percentage of shares. The plan is designed to make a hostile acquisition prohibitively expensive.

Sources close to Campeau said they expect the Toronto firm soon to reinstate an earlier lawsuit challenging the poison pill.

Sources close to Macy’s say the superior value of Macy’s bid will become apparent once the company files financial documents with the Securities and Exchange Commission early next week.

May Shares Tumble

And a source close to Federated said the May-Campeau agreement actually supports Macy’s case. “Analysts had estimated the value of those two businesses (Filene’s and Foley’s) at closer to $800 million,” he said. “It supports a very attractive value” for the new company that would be formed by a Macy’s merger with Federated.

In composite New York Stock Exchange trading, Federated shares climbed 75 cents to $67.25, with 2 million shares changing hands. May Department Stores shares tumbled $2.875 to $37.