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Some earlier reports placed Federated’s offer to be close to $40 a share, but Larry Leeds, chairman of Buckingham Capital Management, said, “I’m somewhat surprised that Federated would be interested in May at the rumored price, if you look at where May’s shares sold before Kahn left the company, and if you look at May’s earnings. If Federated were to step away, the price of May’s shares would decline precipitously.”
According to the former Federated executive, Field’s, being upscale compared with other May units, would be easier to blend into Macy’s. May’s other divisions, such as Hecht’s and Foley’s, generally attract a more moderate customer than Federated’s stores and therefore there would require plenty of work to upgrade to Federated’s level. Federated then runs the risk of losing customers of those stores, and would have to try to convert them to shopping higher-priced assortments.
If a merger is agreed, the Bush administration is not expected to raise many antitrust concerns, especially given the heft of Wal-Mart, Target and even J.C. Penney. “It’s a slight issue,” said the source. Federated’s primary interests lies in May’s Field’s chain in the Midwest, Foley’s in Texas, and Hecht’s in the Washington D.C area.
J.C. Penney is seen as a potential buyer of some May locations, though Penney’s has been expanding in off-the-mall locations, which May doesn’t have, and May stores tend to have about 50,000 square feet more than Penney’s, which average around 120,000 to 130,000 square feet. May’s Lord & Taylor division, which operates smaller units, could be appealing to Penney’s, as well as to Nordstrom. Only last week, Penney’s senior executives said in a conference about its year-end results that the retailer had $2.5 billion in cash on hand and was prepared to act on any attractive real estate opportunities that presented themselves.
There has been speculation circulating that Nordstrom would be interested in the Lord & Taylor flagship on Fifth Avenue and 39th Street, though the location is not as fashionable or as trafficked as Fifth Avenue in the Fifties, or 34th Street.