The Canadian real estate tycoon who last year bought and dismembered Allied Stores Corp. yesterday launched a $4.2 billion takeover bid for Federated Department Stores, the retailing giant that owns Bloomingdale's, I. Magnin and 13 other major U.S. retailers.
Robert Campeau's unsolicited $47-a-share offer for Federated would build the largest retail empire in the United States. Campeau Corp.'s holdings would stretch coast-to-coast, from Bullock's and I. Magnin to Bloomingdale's, Brooks Brothers and Ann Taylor.
A Campeau subsidiary also filed suit in U.S. District Court in Manhattan, seeking to invalidate a two-year-old Federated "poison pill" antitakeover plan.
Officials of Federated, which is based in Cincinnati, declined to comment on the offer or the suit.
The offer sent Federated shares soaring $13 a share, to $48.87, on the New York Stock Exchange.
Federated, which earned $136 million on $7.6 billion in sales for the first nine months of its fiscal year, operates in 36 states from its Cincinnati base. It has been the subject of takeover rumors in recent months.
Two weeks ago, New York real estate developer Donald Trump, who has made runs at such companies as Resorts International and Allegis Corp., said he wanted to buy 15 percent or more common stock of the retailer.
Analysts said they thought Federated would oppose Campeau's proposal.
"I think there will be a fight of some kind," said Monroe Greenstein, a retail analyst with Bear, Stearns. "Federated has indicated in the past it wishes to remain independent."
Campeau fought a bitter battle for control of Allied Stores last year before it acquired the New York-based retailer for $3.6 billion.
Analysts said it was the success of that acquisition that led Campeau to Federated. Since acquiring Allied, Campeau has sold 15 of Allied's original 24 divisions -- including Washington's Garfinckel's department store chain -- leaving Campeau with just a handful of Allied's operations, including Brooks Brothers, Ann Taylor, Jordan Marsh and Maas Brothers' stores.
The dismantling of Allied brought Campeau $1.2 billion, enabling the Canadian company to refinance or pay down $1.6 billion in debt taken on to make the acquisition, said a Campeau spokesman.
Scooping up Federated also would give Campeau, which is a major shopping center developer, a chance to expand more heavily into the U.S. retail real estate market, analysts said.
"It gives him more stores to put into shopping centers that he plans on building here," said Greenstein.
In addition, since the Oct. 19 stock market collapse, many stocks, including Federated's, are selling at discounted levels, making them more attractive targets. "The stock market worked in his favor," Greenstein said.
But probably the biggest reason for buying Federated would be that Campeau could get rid of one of his major competitors and continue in his quest to be a major force in the U.S. retailing market.
"The easiest way to gain market share is to buy your competition," said Carl Steidtmann, chief economist with Management Horizons, the retail consulting arm of Price Waterhouse.
But if Campeau were to own both Federated and Allied, Steidtmann said he would expect the Canadian developer to shut down or sell some of the stores that overlap between the two chains.
"Yes, you will probably see some stores closed. Which ones they'll be, though, I can't tell you," he said.
Analysts also expect Campeau to sell off some of the more unprofitable divisions of Federated, as he did at Allied.
In documents filed with the SEC, Campeau said he would possibly put up for sale Federated's Gold Circle, The Children's Place, MainStreet and Ralph's grocery stores.
He also has instituted harsh cost-cutting measures at the Allied divisions he has kept. Earlier this month, for example, Allied Stores announced it was slashing more than 600 jobs from Jordan Marsh's Boston headquarters.
Analysts expect another round of cuts to occur in February at the other Allied units, including Jordan Marsh. And if Campeau acquires Federated, they say much of the same can be expected.
In a letter sent Monday to Federated Chairman Howard Goldfeder, Robert Campeau said it was the company's "desire to enter into a friendly, negotiated merger agreement."
But Campeau indicated that even if it were not friendly, the company would proceed with the bid for the company's 89.6 million shares, made via Campeau's wholly owned subsidiary CRTF Corp.
The bid is contingent on sufficient financing. A Campeau spokesman indicated that shouldn't be a problem; the developer already has begun discussions with some of the nation's major banks.