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Campeau Gets Federated; Macy’s to Buy Bullock’s

Times Staff Writer

Campeau Corp. won its two-month takeover battle for Federated Department Stores on Friday, but rival R. H. Macy & Co. will walk away with three venerable names in California retailing: Bullock’s, its high-brow cousin Bullocks Wilshire, and I. Magnin.

A tenacious Campeau will end up with one of the nation’s largest retailers in the biggest non-oil takeover in U.S. history. The Canadian developer agreed to buy Federated for $6.6 billion, and with it comes some “crown jewels” of retailing.

Campeau will acquire such imposing names as Bloomingdale’s in New York, Burdine’s in Miami and Rich’s in Atlanta, but it will also be forced to sell some. In getting financing for the deal, Campeau has, for instance, agreed to sell classic clothier Brooks Bros. to a British firm.

Macy’s agreed to buy Bullock’s, Bullocks Wilshire and the tony I. Magnin of San Francisco, for $1.1 billion. As a result, it will get a long-sought spot in the lucrative--but highly competitive--Southern California department store industry.

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At the Bullock’s store in the South Coast Plaza, shoppers were divided over the prospect of Macy’s taking over.

“Bullock’s is my favorite store. I don’t like nice things to change,” said Pam Andrusko, 45, a sales manager from Costa Mesa who said she has never been to a Macy’s store. “When corporations are bought, people have to pay for them. They do it by taking money out of the business. I think (Bullock’s) will change for the worst.”

But Lynn Porter, 18, an accountant from Anaheim, was excited. “I like Macy’s,” she said “There’s one in San Francisco and one in New York and it’s really neat. But they shouldn’t change the name. Bullock’s has really established itself--especially here at South Coast Plaza--as a really nice place to shop. Changing the name wouldn’t really achieve anything.”

There was no official word on whether Bullock’s name would be dropped in favor of Macy’s, but Bullock’s chairman, James E. Gray, said he thinks Macy’s should keep it. Gray also said he anticipates few changes immediately.

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“I think people are glad to have it finally concluded,” he said. “Now we can get on with the transition period and finally reassume business.”

Industry experts said that ripples from the Federated takeover will be felt by retailers nationwide and it is likely to shake up things among Southern California department stores and supermarket chains.

Campeau has said it will sell Ralphs Grocery, the only supermarket chain in the Federated collection of stores. The sale of Ralphs, combined with Vons pending purchase of Safeway supermarkets in Southern California, might have an impact on grocery bills throughout the area, analysts said. There was no announcement Friday on how soon Campeau or Federated might move on a sale.

The takeover agreement seemed to provide Macy’s and Campeau the parts of Federated they coveted most, analysts said.

“Everybody got a piece of the pie,” said retailing analyst Walter F. Loeb at Morgan Stanley & Co., a brokerage firm. “Macy certainly got a reward by getting a presence in a market (Southern California) it was not in before and an upscale specialty retailer.”

‘Got the Gem’

Campeau, Loeb said, “got the gem of them all--Bloomingdale’s. Once you have Bloomingdale’s you have the jewel of American retail.”

Campeau might expand Bloomingdale’s because of its name and reputation, Loeb said.

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Campeau agreed to pay $73.50 a share for Federated’s 88.5 million shares. The $6.6-billion bid is considered high by many analysts and is $2 billion greater than Campeau’s original bid, made in late January.

Macy’s seems to have gotten what it wanted most out of a merger with Federated. Macy’s chairman, Edward S. Finkelstein, said in a statement: “Acquiring Bullock’s and I. Magnin at a fair price is an attractive way to resolve this matter. We are especially pleased with this outcome since they are two of the Federated divisions in which we were most interested. Their acquisition enables us to achieve an important strategic objective--expanding Macy’s presence in California.”

Much Speculation

Many have speculated on what Macy’s will do with Bullock’s and Bullocks Wilshire, two highly regarded and successful Southern California retailers. Macy’s already operates stores in Northern California.

Thomas H. Tashjian, vice president of retail trade at Seidler Amdec Securities, said Macy’s has made a smart move in acquiring the Bullock’s and I. Magnin chains rather than starting a new Macy’s chain in Southern California. “The department store pie is not broken up into more pieces,” he said. “It’s nicer to buy a competitor than add a competitor, particularly in a mature business like the department store business.”

Macy’s is regarded as a savvy and aggressive retailer. But Southern California department store executives did not seem to be worried about having to compete against Macy’s.

“This is an arena where we’ve learned that you do your own thing and not worry about the others,” said Edgar S. Mangiafico, chairman of May Co. California. “Just do what we’re doing and do it well and it will take care of itself.”

Philip M. Hawley, chairman of Carter Hawley Hale Stores of Los Angeles, owner of The Broadway, declined to comment, according to a spokesman. The spokesman also said Broadway chairman Michael Hecht would not be available for comment.

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Among Largest Retailers

Campeau is expected to sell off other pieces of the Federated retail empire--one of the nation’s largest retailers, which posted sales of $11.1 billion last year and has 133,000 employees--to reduce its debt. Campeau carved off another retailer--Allied Stores Corp.--in 1987 after a long and bitter takeover at the end of 1986.

Campeau has already agreed to sell two other Federated divisions--Foley’s in Texas and Filene’s in Boston--to May Department Stores of St. Louis. And, Campeau will sell its Brooks Bros. division to British retailer Marks & Spencer for $720 million.

Robert H. Morosky, president of Allied Stores Corp., which was taken over by Campeau two years ago, will lead the combined Allied-Federated operations. Morosky said Campeau planned to sell off Federated’s supermarket, discount store and specialty store chains, as well as some of its department store chains to help pay off the debt.

That would leave the company with the Rich’s, Lazarus, Goldsmith’s, Burdine’s, Bloomingdale’s and Abraham & Straus department store chains, Morosky said.

‘The Crown Jewels’

“These are the crown jewels . . . that have a long history of being important and very successful,” he said in an interview with Associated Press. Morosky described the acquisition, as “a once-in-a-century opportunity.”

Analysts said other regional department store companies might expand and increase their power by picking up smaller Federated divisions, which include Abraham & Straus of New York, Burdine’s of Florida and Lazarus of Ohio.

“I do feel that this marks a major shift of power in the U.S. retailing industry,” Loeb said. The battle for Federated began in late January when the company of Canadian developer Robert Campeau surprised the retail industry with a $4.2-billion bid for Federated. Campeau, analysts said, was attracted primarily by Federated’s valuable real estate holdings and store leases.

Although regarded as a creative retailer, Federated’s heavy expenditures to develop new stores proved a drag on profits. As a result, its stock price suffered, making it an attractive takeover target.

Met by Sadness

The agreement was met by some sadness over the loss of another notable retailer to takeovers. “The problem I see with this takeover,” said Loeb of Morgan Stanley, “is that a fine retailer has been dissected.”

Still, he added, “Federated and everybody else wants to go back to work.”

Contributing to this story were Times staff writers Mary Ann Galante, Linda Williams and Nancy Yoshihara.

PICKING UP THE PIECES Campeau’s $6.58-billion agreement to buy Federated Department Stores would affect not only some of Federated’s stores but also some chains owned by Allied Stores, a division of Campeau.

What Happens to Federated Department Stores

Bullock’s: Los Angeles-based chain being sold to Macy’s, along with the Bullocks Wilshire stores.

I. Magnin: San Francisco-based fashion retailer being sold to Macy’s.

Ralphs: Compton-based grocery chain is for sale. Ralphs management and Lucky Stores are top contenders.

Bloomingdale’s: New York-based chain was bought by Campeau.

Filene’s: Boston-based chain is to be sold to May Department Stores.

Foley’s: The Texas chain is to be sold to May Department Stores.

Other Stores: In late January, Campeau said that--if successful--it would consider selling the Gold Circle discount chain, MainStreet apparel chain, Children’s Place apparel stores, and a new chain called Accessory Place.

What Happens to Allied Stores

Brooks Bros.: Campeau to sell chain to Marks & Spencer, the British clothier.

Other stores: Campeau said it may have to sell some Allied or Federated stores in areas where both companies have stores. Allied operates Jordan Marsh and Maas Bros. in Florida, where Federated operates Burdine’s. Also, Allied owns Sterns in New York, where Federated owns Bloomingdale’s and Abraham & Strauss.


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