NEW YORK, Feb. 27 -- Federated Department Stores Inc., owner of Macy's and Bloomingdale's, has agreed to acquire May Department Stores Co., operator of Hecht's and Lord & Taylor, for about $10.4 billion, executives close to the talks said Sunday.
The deal, which is to be announced Monday, raises questions about the future of the 148-year-old Hecht's name, the only surviving home-grown department store in a Washington region once crowded with brands such as Woodward & Lothrop, Garfinckel's, and Lansburgh's. Federated has long sought to create a national department store chain under the Macy's nameplate, and analysts predict the Hecht's banner eventually could be dropped.
Federated operates Bloomingdales, such as this one in New York. The Federated chain has a total of 459 stores nationwide.
(Frank Franklin Ii -- AP)
If it is, it would represent "the passing of a retail era in the region," said John Tydings, former president of the Greater Washington Board of Trade.
The combination of May, with 501 stores, and Federated, with 459, joins the nation's two biggest department store chains into a retailing colossus. The deal must still be approved by shareholders and regulators. The combined company may have to close stores in certain markets such as the mid-Atlantic and California, but regulators are not expected to block the deal, according to analysts.
Sources, who spoke only on the condition of anonymity because the deal has not yet been announced, said the boards of the two companies approved the deal over the weekend after days of often contentious negotiations over how much Federated would pay for May. Sources said the two sides agreed that Federated would pay from $35 to $36 for each May share. That amount will come in a mixture of Federated stock and cash. May stock, which had been rising on reports of a possible acquisition, closed Friday at $35.35 per share.
Precise details of the agreement could not be determined Sunday evening. Spokesmen for May and Federated declined to comment on the deal in advance of the planned public announcement.
Federated chief executive Terry J. Lundgren is expected to lead the combined company. The two companies discussed merging in the past, but talks broke down over several issues, including who would serve as chief executive. That issue disappeared in January after May ousted chairman and chief executive Eugene S. Kahn.
The deal would bring together some of the most venerable names in retailing, from May's Marshall Field's and Lord & Taylor to Federated's Macy's and Bloomingdale's. Although their names are grand, their place in the retail world has grown more uncertain.
Mid-priced department storecompanies such as May have been in a downward spiral, caught between fast-growing discounters with cheaper apparel, such as at Wal-Mart Stores Inc. and Target Corp., and high-end merchants with trendier fashions, like Neiman Marcus Group and Saks Fifth Avenue Inc.
Specialty stores, from Gap Inc. to Williams Sonoma Inc., have taken their own bites out of the department stores' clothing and home furnishings business.