The Race to Be Bigger: After Losing Field’s, Federated Keen to Buy

May Co. outbid Federated for Marshall Field’s, but Federated still wants to make an acquisition, which could include a prize such as Neiman Marcus.

Terry Lundgren

Terry Lundgren

Photo By WWD Staff

NEW YORK — Federated is still on the hunt.

After losing its bid for Marshall Field’s to May Department Stores, Federated Department Stores remains eager to make acquisitions — and it could even snare a prize such as Neiman Marcus.

Analysts and executives close to these companies also say Federated, which has more than $900 million cash on hand, might make a grab for Dillard’s or Nordstrom.

“With Marshall Field’s going to May, this leaves an extremely cash-rich suitor standing on the sidelines: Federated,” said Dana Cohen, analyst for Banc of America Securities, in a recent research note. “As of the end of the first quarter, Federated had a whopping $913 million of cash on the balance sheet. In addition, the company has a history of successful department store acquisitions in the past, most recently the Hawaii-based Liberty House in June 2001.”

One retail analyst, who works closely with major department stores, said if Federated could pry Neiman Marcus from its owners, the Smith family, it “would be quite a catch” that “Wall Street would applaud.”

“Knowing the Smiths and knowing Terry [Lundgren, chief executive officer of Federated], the whole thing is intriguing,” said a retail executive.

Considering the size of the Field’s buy — $3.2 billion — May has a lot to digest, so the next takeover move is likely to come from Federated. However, it will be tougher to find a retailer with as much cachet as Field’s, or one that fits cleanly into the corporate fold of Federated, which includes flags such as Macy’s and Bloomingdale’s. Also, Federated’s game plan of growing its market position is going well. With the wind at its back, the company can be patient before pouncing on a deal.

“This doesn’t have to be a game of chess,” said one chief executive whose company competes with May and Federated. “In the acquisition game, you can move twice in a row if you want to.”

Making a play for Dillard’s, Neiman Marcus or Nordstrom would be difficult for Federated. None of these retailers is for sale, at least officially, and all are family controlled. However, Dillard’s, a traditional department store, would give Federated greater penetration in the South, and makes more sense for Federated rather than May, since May has more coverage in Dillard’s territory through its Foley’s and Famous-Barr divisions.
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