Federated Buys Share of Macy’s for $449 Million : Retailing: It hopes to eventually merge the two into a department store giant. Macy’s CEO calls such talk ‘premature.’

Federated Department Stores Inc. said Sunday that it has bought a share of R.H. Macy & Co. with an eye toward eventually combining the two to become the nation’s biggest department store company--a scheme that Macy’s chief executive quickly dismissed as “premature.”

Federated said it closed a deal Friday with Prudential Insurance Co. of America to buy for $449.3 million half of the secured claim Prudential holds in the Chapter 11 reorganization of Macy’s, the New York-based retailer.

Cincinnati-based Federated paid Prudential $109.3 million in cash, with the balance to be paid in three years plus interest, at a floating rate. Federated also took an option to buy the rest of Prudential’s secured claim in Macy’s within three years.

Prudential’s claim represents 15% of the overall debt in the Macy’s reorganization. The insurance company had been Macy’s largest single creditor.

Federated, which started the talks in the fall of 1993, said it negotiated the deal without Macy’s knowledge. Federated’s management told Macy’s about its plans Sunday afternoon, Federated spokeswoman Carol Sanger said.

Allen Questrom, Federated’s chairman and chief executive, said the purchase is a sound investment for Federated’s shareholders and gives Federated a platform that could, with support of other creditors, lead to a combination of Federated and Macy’s.

Questrom said Federated, which emerged in February, 1992, from two years in Chapter 11 reorganization, is aware that the complex bankruptcy process may not allow the two companies to combine.

Macy’s chairman and chief executive, Myron E. Ullman III, issued a statement Sunday saying the company was “not surprised there is interest in Macy’s” in light of its progress in “restructuring the company and restoring it to financial health.” But Ullman had no comment on Federated’s plan for an eventual merger.

“Macy’s has just begun the process of negotiating a plan of reorganization, so it is premature to discuss what implications today’s announcement may have on the reorganization process,” the statement said. “We look forward to working with all our creditors, who together have claims exceeding $6 billion, to arrive at a consensual plan of reorganization.”

Macy’s spokeswoman Laura Melillo said it was also too soon to comment on the potential impact of Federated’s gambit on the Bullock’s chain, a Macy’s subsidiary that operates 20 stores in the western United States, many of them in Southern California.

Macy’s had $6.3 billion in sales for fiscal 1993. The retailer operates 111 Macy’s and Bullock’s department store branches, as well as I. Magnin, Aeropostale and Charter Club specialty stores.

Federated has $7 billion in annual sales, operating 219 stores in 26 states. Federated’s store groups are Bloomingdale’s, Abraham & Straus, the Bon Marche, Burdines, Goldsmith’s, Jordan Marsh, Lazarus, Rich’s and Stern’s.

Sanger said it is premature to discuss what changes Federated would make if it acquired all of Macy’s. Both companies are heavily concentrated in some markets, particularly New York and New Jersey.

The deal makes Federated a creditor of Macy’s. That allows Federated a voice in what happens to the privately owned Macy’s as it tries to emerge from the bankruptcy reorganization it entered in January, 1992.

Federated’s move represents a reversal of fortunes. In 1988, Macy’s was an unsuccessful bidder to buy Federated. Federated, against its will, was bought that year by Canadian businessman Robert Campeau, before Campeau’s real estate and retailing empire unraveled and sent Federated into Chapter 11.

After the Campeau takeover, Federated sold its I. Magnin and Bullock’s store groups in California to Macy’s.