The new department store giant to be formed by the merger of May Department Stores Co. and Associated Dry Goods Corp. plans to operate all of its stores even in markets where the two chains compete, May officials said today.
However, under the merger agreement approved by both companies' boards of directors today, Associated's name will soon disappear from the ranks of retailers. May Department Stores will become the official corporate name of the parent company running all of Associated's 14 retail operations, including Lord & Taylor, Caldor's and Loehmann's.
The merger, which still must be approved by shareholders of both companies and several antitrust officials, will create "one of the world's greatest retail companies," May's chairman, David C. Farrell, said in a news conference shortly after the boards met.
The combination of May and Associated "will definitely give both companies a considerable edge in the marketplace," said Farrell, who noted that the marketplace has grown increasingly competitive over the past five years. May is the nation's third-largest department store operator, whose holdings include Washington's Hecht Co. Associated is the nation's fourth-largest department store firm.
"Our intention is to continue to operate all the existing operations of Associated," Farrell said -- even in Denver and Pittsburgh, where Associated and May have competing stores. In all cases, Associated's chain will continue to be operated independently of May's, he said.
Given the increasing competition in retailing, especially from discount and specialty stores, May officials said they found no reason why the company should be forced to divest any of its stores to merge with Associated. However, Farrell noted, May definitely will go ahead with the merger even if the government requires divestiture.
The news conference extolling the new retailing conglomerate started 75 minutes late because Associated's board took longer than anticipated to approve the merger. It was "a matter of taking time" to make sure "every last board member was completely satisfied," said Associated's chairman, Joseph H. Johnson. Johnson will become a director on May's board but his day-to-day role at May has not been determined.
"Im going to stay as long as I can to be of service," he said after the news conference. But he added that he will not move to May's St. Louis headquarters. "It will definitely be from New York," where Associated is based, Johnson said.
Johnson noted that he has always said "my personal preference would be -- if it ever came to the point our company was pressured to be part of a merger -- that one of my first choices would be May Department Stores. I have nothing but the greatest respect for them."
Johnson defended the merger's final price, under which each share of Associated stock would be swapped for 0.86 share of May stock. Based on May's stock price on July 16, the day the merger was announced, that exchange ratio was equivalent to $61.81 a share. That sum was less than May's initial offer on June 20, when it proposed a stock swap in which each Associated share would be worth $66 of May stock.
Johnson said Associated turned down the initial offer because at the time it would have represented only 0.75 percent of May's stock. The stock market has since declined, but the 0.86 exchange ratio "is much better than where it started. It was a fair deal for our stockholders . . . as opposed to the alternatives we may have had."
Johnson added, "there were people in the wings" seeking to buy all or parts of Associated. "We didn't even get to that point," because the 0.86 exchange ratio represented "a fair offer," he said.
May's stock closed at $73.38 yesterday. If the merger took place when the stock was at that price, the stock swap would be worth $63.10.