SEC Opinion Sides With Campeau : Macy’s Push to Delay Bid, Require New Offer Is Rejected

Campeau Corp.’s battle for Federated Department Stores received a boost Thursday when the Securities and Exchange Commission took the Canadian company’s side in one of the takeover disputes being fought in court.

The SEC, in an advisory opinion asked for by U.S. District Judge Leonard Sand, rejected arguments that delayed Campeau’s bid and required the Toronto developer to start over with a new offer for Federated, owner of Ralphs supermarkets and Bullock’s department stores.

The recommendation proves a setback for rival suitor R. H. Macy & Co., which has argued in favor of pushing back Campeau’s bid. Analysts say that the delay caused by a new bid would take the pressure off Federated shareholders. As of now, Campeau’s bid expires two weeks before Macy’s.

The SEC legal opinion is now being reviewed by Sand, who will have the final say over the matter and rule over lawsuits that Campeau and Macy’s have filed against each other.

Although the SEC opinion will help Campeau, analysts say the judge’s ruling on Federated’s takeover defense plan is likely to be much more significant to the takeover battle.

Campeau wants the judge to kill Federated’s so-called “poison pill” defense. The defense would allow Federated shareholders to buy newly issued stock at half price. As a result, Campeau said the takeover of Federated might become too expensive to complete.

“I don’t think (the timing of Campeau’s offer) is the major issue,” said William N. Smith, a retail analyst at the brokerage firm of Smith Barney, Harris Upham & Co. “I think this (poison pill) carries much more weight.”

The SEC opinion, which was requested by Judge Sand, stems from a lawsuit filed by Macy’s earlier this month. The suit was filed after Campeau sweetened its original offer to $75 a share for 80% of 70.5 million Federated shares and $44 for the remaining 20%.

Macy’s contends that the new offer constitutes a new bid rather than an amended bid. A new bid needs a minimum of 20 business days before it expires versus only 10 days under an amended bid. The SEC, however, disagreed and told Sand that Campeau’s revised bid was not a new offer.

Under Sand’s order, the bids from both companies must remain open for three business days after he hands down his final decision.

As a result, Campeau has extended its bid, which was to expire today, to March 22.

Macy’s bid is scheduled to expire April 4. The retailer is offering $77.35 a share for 80% of Federated’s stock.

The remaining shares would be exchanged for shares in the company formed by the merger of Macy’s and Federated.