Shareholders Endorse Retail Union

The proposed merger has raised questions about the future of Hecht's, a 148-year-old brand owned by May.
The proposed merger has raised questions about the future of Hecht's, a 148-year-old brand owned by May. (By Gerald Herbert -- Associated Press)
By Michael Barbaro and Dana Hedgpeth
Washington Post Staff Writers
Thursday, July 14, 2005

Shareholders of the companies that own Hecht's and Macy's approved an $11 billion combination yesterday that would create the nation's second-largest department store chain behind Sears Roebuck -- and has already started roiling the local retail industry.

Federated Department Stores Inc.'s planned acquisition of May Department Stores Co. has triggered a flurry of speculation about the future of the 148-year-old Hecht's brand. The 61-store, Washington area chain and most of May's other regional brands are likely to be converted into Macy's or Bloomingdale's, Federated said.

If the deal is completed, Federated plans to turn Hecht's flagship downtown Washington store into a Macy's, according to a city economic development official and a second source in the development community who were briefed on the matter by a Federated executive. The two spoke on the condition of anonymity because they are not authorized to publicly discuss the issue.

At the same time, Bloomingdale's, Federated's most prestigious brand, is in talks to open the chain's first District location, at a small store in Georgetown, according to a local developer.

Anthony M. Lanier, president of EastBanc Inc., a major developer of shops and condominiums in Georgetown, said he is in early discussions to bring Bloomingdale's to the former Staples store site at M and 33rd streets NW.

Federated spokesman Jim Sluzewski said "no decisions have been made" on converting May stores to Macy's or Bloomingdale's. A Bloomingdale's spokeswoman did not return messages about the possibility of a store in Georgetown.

Lanier cautioned that his talks with Bloomingdale's are in an early stage. "We're talking to them, but I'm still in the church and praying to get them," said Lanier, who redeveloped the high-end retail area at Cady's Alley in Georgetown. "I'm going to send them flowers and candy to try to seduce them. I'm chasing them like a bee chases honey."

Lanier said he is also pursuing other upscale department stores, including Neiman Marcus, Saks Fifth Avenue and Barneys New York, for the roughly 50,000-square-foot building. He said he envisioned Bloomingdale's building one of its new boutique-style stores in the comparatively small space, similar to one in New York's SoHo neighborhood.

At back-to-back meetings yesterday, an overwhelming majority of shareholders who cast votes were in favor the deal, the companies said.

The acquisition would establish Federated, which has struggled to gain a foothold in the Washington area, as the region's dominant department store owner, with about 35 stores, including 21 Hecht's and about eight Lord & Taylors. Federated operates five Macy's and two Bloomingdale's in the area.

But the combination could raise prickly antitrust questions. There are about 100 malls where both May and Federated operate stores, including the Fair Oaks Mall in Fairfax and Tysons Corner Center. Analysts predict that to satisfy regulatory concerns, the combined company would sell stores in some of those locations.

The proposed acquisition, which would create a chain with nearly 1,700 stores, still faces a review by the Federal Trade Commission. But Deborah Weinswig, a retail analyst at Citigroup Smith Barney, said she does not expect "any significant antitrust issues to arise."

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