Weekend of Decision: May Co. Board to Meet On Merger in New York

The directors of May Department Stores and Federated Department Stores will meet through the weekend and merger is on their mind.

Terry Lundgren

Terry Lundgren

Photo By WWD Staff

NEW YORK — Merger talks between Federated Department Stores Inc. and May Department Stores are expected to take a crucial turn this weekend as members of both boards are converging on New York.

First, the Federated board is scheduled to meet today, which reportedly will take place in the Macy’s Herald Square boardroom. It is a regularly scheduled board meeting, sources said.

Meanwhile, directors from the May board are flying into town for meetings through the weekend, though not all are from outside New York. One source said these May board members will meet with Skadden, Arps, Slate, Meagher &through the weekend, though not all are from outside New York. One source said these May board members will meet with Skadden, Arps, Slate, Meagher & Flom, May’s lead attorneys on acquisitions, during the weekend.

Presumably, Federated and May officials will get together to hash out terms of a deal and talk about the future, but the source could not confirm that.

Last year, Skadden represented the St. Louis-based May in its deal to buy Marshall Field’s from Target for $3.4 billion.

A May spokeswoman declined to comment on any board meeting. Federated officials could not be reached for comment.

Federated’s headquarters are in Cincinnati, but Terry Lundgren, the retailer’s chairman, chief executive and president, is based at Macy’s Herald Square.

Federated and May have been closing in on a price. Wall Street is apparently expecting the retailers to strike a deal, with the stock of May trading heavily in recent days. On Thursday, May’s stock closed at $34.10, rising 12 cents. The stock’s 52-week high is $36.48, and its low is $23.04. Federated’s stock closed at $57.01 on Thursday, rising 39 cents. Its 52-week range is $42.80 to $59.91.

As previously reported, Wall Street analysts have written in research notes that they expect a merger and that the takeover price would probably be at just under $40 a share.

Sources close to the May board have said the directors are anxious to strike a deal with Federated for several reasons. May has been maintaining profitability at a level that’s not far from other major department store chains, but its profits used to be far greater and have been shrinking for several years. Profits peaked in the late Nineties, with an impressive $940 million net, but for 2004 came in at $524 million. Market share and sales volume have also been shrinking.
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