Marshall Field & Co. of Chicago agreed yesterday to acquire Hess's Inc., an Allentown, Pa. department store chain in an exchange of stock worth $23 million.
Hess's is a $20-million-a-year business with 16 stores, all of them in Pennsylvania except for a recently opened unit in Frederick, Md.
In addition to its Chicago department stores, Marshall Field & Co. owns Halle's in Ohio, Cresent and Fredericks & Nelson in the Pacific Northwest and earlier this year acquired Breuners, another West Coast chain.
Last February, Marshall Filed successfull resisted an unfriendly takeover attempt by Carter Hawley Hale-Inc., the California company that owns Neiman-Marcus, and the Broadway, Weinstocks and Emporium Capwell department store chains.
In another merger development yesterday, the Federal Trade Commission moved to block plans of Grand Union Co. to acquire Colonial Stores Inc. another supermarket chain.
The FTC issued a complaint saying the merger "may substantially lessen competition in the retail food industry" and authorized its lawyers to go to court to try to block the combination.
The FTC complaint charged Grand Union had chosen one of the most anti-competitive methods of expanding into the southeastern part of the country - acquiring a major company there.
The agency is expected to try to require Grand Union to divest Colonial and to continue to operate Colonial as a separate company until the legal fight is over.
Colonial, a major food chain in southern Virginia, at first objected to the merger, saying it raises "serious questions as to possible violation of anti-trust laws," but later withdrew its objections.
Similiar complaints were raised when Carter Hawley Hale tried to buy control of Marshall Field. Anti-trust objections are less likely to be raised to the Marshall Field-Hess "combination because Hess's is a small company with a limited market area.
The agreement in principle announced jointly by the two chains calls for each share of Hess's stock to be traded for one share of Marshall Field stock. The 1.3 million shares of Hess would be worth $23 million at the current $17 price of Marshall Field shares.
The preliminary agreement requires the approval of the boards of directors of both companies and of the shareholders of Hess's plus government regulations.
With a reputation as a highly successful small town department store, Hess's has grown rapidly this year, adding five new stores including the one in Frederick. That expansion will hurt Hess's profits this year, but the company "has excellent future prospects and will figure importantly in our plans for growth," said Angelo R. Arena, president of Marshall Field.
Marshall Field had been considered an acquisition target rather than an acquirer until Arena became president last year.