Campeau to Sell $4.4 Billion of Federated Assets

Robert Campeau, beaming over his victory in the battle to buy Federated Department Stores, outlined plans Tuesday for revamping and expanding his retail domain, which soon will include Bloomingdale’s and other merchandising gems.

At a news conference in the Waldorf-Astoria Hotel attended by scores of reporters, photographers, lawyers and bankers, the Toronto developer said he plans to sell $4.4 billion worth of Federated assets to help pay the price of his hard-won acquisition. Although Wall Street has put a value of $6.6 billion on the deal, Campeau said the actual cost will approach $8.8 billion.

“We think this is a fantastic acquisition for us to have done,” Campeau said. “First of all, we are kind of proud that we were able to do two major hostile takeovers in the period of . . . 17 months.”

In late 1986, Campeau first stunned Wall Street by buying control of Allied Stores--owner of the Ann Taylor and Brooks Bros. chains--after a protracted fight. With the Federated purchase, he has firmly established himself as a tenacious force on Wall Street, observers have said.

One area of potential expansion is Bloomingdale’s, which Campeau said he would like to establish as a national chain. “Of all of the stores, Bloomingdale’s has the most national application, and we certainly will be looking at the West Coast,” Campeau said.

The developer, who originally indicated that he would sell the Ralphs supermarket chain in Southern California, elaborated on his recent change of mind regarding the 129-store division, based in Compton. He said Ralphs would become part of a newly created Campeau subsidiary.

Despite Campeau’s apparent willingness to keep Ralphs in the Campeau fold, he indicated at the news conference that he would sell if the price were attractive enough.

“I guess that’s consistent with most businessmen’s attitudes that anything’s for sale at the right price,” said Ralphs Chairman Byron Allumbaugh, who has put together a management bid to buy the supermarket company from Federated. “I’m told that Campeau is aware of our situation and how long we have been in limbo and has said that a quick decision will be made with regard to Ralphs.”

A source close to Campeau said that “it’s just not clear what’s going to happen to Ralphs.” Details of the subsidiary arrangement have not yet been worked out, the source said.

Along with other Federated executives, Allumbaugh has been invited to meet with Campeau on Thursday at Federated’s Cincinnati headquarters. In Allumbaugh’s view, Ralphs management and a partner, the Los Angeles merchant banking firm of Riordan Freeman & Spogli, “still are the only ones that could complete an offer (for Ralphs) in a short period of time.”

A rival proposal by Lucky Stores, another bidder with strong Southern California operations, would face perhaps months of scrutiny by the Federal Trade Commission for possibly anti-competitive effects.

Pressed for information about how he plans to cut costs at Federated while expanding the operation, Campeau was vague on such questions as layoffs and store closings. He stressed that no specific plans have been made but acknowledged: “There will be some streamlining. You cannot survive and compete by having jobs and jobs and jobs.”

After his 1986 purchase of Allied Stores, Campeau sold off several divisions and laid off thousands of workers.

At the news conference, Campeau was joined by Robert H. Morosky, president and chief executive of Allied, and Allen Finkelson, a director of Campeau Corp. and a partner in the law firm of Cravath, Swaine & Moore.

Campeau and Morosky, who will assume the titles of president and chief executive at Federated, told reporters that the merger would result in a strong retailer that would justify the high price.

Campeau said the entire cost of the acquisition would include not only $6.6 billion for Federated’s 88.2 million shares, but also about $200 million in legal and investment banking fees and refinancing of about $800 million in long-term debt. Much of the fees will go to Campeau’s two principal investment advisers, First Boston Corp. and Wasserstein, Perella & Co.

As part of its agreement with R.H. Macy & Co. to end the bidding war for Federated, Campeau agreed to sell Federated’s 25-store, San Francisco-based I. Magnin and the 29-branch Bullock’s-Bullocks Wilshire operation in Los Angeles to Macy for $1.1 billion.

The company also has said it will sell the 38-store Foley’s division in Houston and the 18-store, Boston-based Filene’s to May Department Stores for about $1.5 billion. In addition, it plans to sell the Brooks Bros. division of Allied to Marks & Spencer, a British clothing retailer.

On Monday, developer Edward J. DeBartolo of Youngstown, Ohio, said he was negotiating to acquire part of Federated. DeBartolo lent Campeau about $480 million toward the Federated acquisition in return for more than half the shares of its U.S. holding company, Campeau Corp. U.S.

“We’re going to own a part of Federated, and we’ll be in the development end of Federated,” DeBartolo said. “We’re going to be joint-venture partners with Campeau in all new development deals that come out of Allied Stores and Federated.” The DeBartolo firm, which owns Mission Viejo Mall, has said it hopes to expand its West Coast operations.

Campeau, asked if there would be a 50-50 split with DeBartolo, brushed aside the question. “I wouldn’t lose any sleep on that,” he said.

Martha Groves reported from Los Angeles, and Eileen V. Quigley reported from New York.