Associated Dry Goods Corp. yesterday told the May Department Stores company that it would agree to merge the two retailing chains if May raises its bid by about $100 million to $2.8 billion.
In a letter to May's chairman, David C. Farrell, Associated Chairman Joseph H. Johnson said "the only significant point of disagreement" between the two firms is how much May should pay for Associated.
"The other points we had discussed with you do not present an impediment to a transaction between our companies," Johnson said.
May earlier had offered to give Associated shareholders 0.85 share of May stock for each of their shares of Associated. Yesterday, Johnson noted that Associated's board had rejected that offer, but said, "We did indicate a willingness . . . to recommend an exchange ratio of 0.882."
Based on yesterday's $78.68 closing price of May stock, the price asked by Associated is about $2.52 a share more than May's last offer.
Johnson said that if May does not agree to raise the price, then May is "welcome" to join with other retailers and make a bid to buy parts of Associated's retailing operations.
A May company spokesman last night refused to comment on the Associated counterproposal, saying, "We received the letter, but we don't have a comment."
Associated, the nation's fifth-largest department store operator, owns 14 retailing companies, including Lord & Taylor, the Caldor discount department stores and Loehmann's, the big off-price retailer of women's clothing. To ward off an unfriendly takeover from May, Associated has said it is considering selling some of its operations and has indicated it already has attracted interest from many companies.
May, the nation's third-largest department store operator and the parent of the local Hecht Co., surprised the retailing and financial communities last month when it made an unsolicited $2.7 billion takeover bid for Associated. May proposed to complete the merger by a stock swap in which each share of Associated would be exchanged for May stock then worth $66.
After Associated rejected that bid, May raised its offer to the 0.85 exchange ratio. Based on yesterday's stock prices, that offer would be equivalent to $66.87 a share. However, because of market fluctuations, the offer was at one point equivalent to $71.40.
When Associated's board turned down May's bid, May went directly to stockholders late last month, offering to pay them $60 in cash for every share of Associated. Among other things, May hoped that stockholders would pressure Associated's board to accept the higher price that would be paid in a stock swap.
The cash tender offer is still in effect, but few shareholders have offered their stock to May so far.
May indicated yesterday that it may have to delay by a few days the July 24 expiration of that offer.
In a brief statement, May said the Federal Trade Commission has asked it to submit more information about the proposed acquisition and its antitrust implications before the FTC decides whether to oppose the merger. May cannot buy any more Associated shares until 10 days after it has complied substantially with the FTC's request.
May said it expected to furnish the requested information by the end of this week, pushing back the July 24 deadline.