Federated Department Stores Inc. has agreed to sell four mall stores in Maryland to competing department store owners under a pact reached with state antitrust regulators yesterday.
Federated, which operates Macy's and other chains, already was set to sell the stores as a result of its merger with May Department Stores Co., which operates Hecht's and Lord & Taylor stores in the region. In combining the two companies, Federated officials planned to eliminate stores in malls where the combined company wound up with two properties.
However, that plan raised antitrust concerns among regulators in several states who were worried it would diminish consumer choice as Federated closed stores owned by its former competitor.
Under yesterday's agreement with officials in Maryland and four other states, Federated agreed to sell those properties to other department store chains -- even if it means accepting less money than it could have received by selling them for another use.
The $11 billion cash-and-stock merger between the two companies was finalized yesterday. Hecht's, a dominant department store brand in the Washington region for more than 100 years, will cease to exist next year, and those stores will convert to Federated's flagship Macy's brand.
The Maryland stores covered by yesterday's agreement are Hecht's at Westfield Shoppingtown Wheaton and three Baltimore area Macy's stores -- in Owings Mills, White Marsh and Glen Burnie. No stores in Virginia or the District are slated to be sold as part of the merger.
Similar agreements were reached between Federated and attorneys general in Massachusetts, California, New York and Pennsylvania. California has the most stores slated for sale, 26.
For the stores in the affected states, Federated must accept "qualified offers" from any of its traditional competitors, including Nordstrom, Dillard's, Gottschalks, Neiman Marcus, Saks Fifth Avenue, Saks Department Store Group, Bon-Ton, Elder-Beerman, Boscov's, Belk, Proffitt's, McRae's and Von Maur. Even if Federated receives higher offers from other bidders, it must sell to a competing department store as long as the offer is "commercially reasonable." The attorney general in each state must approve the sale.
The Federal Trade Commission, which has federal authority to assure competition under antitrust laws, took no action on its own, though it participated in the investigation that led to yesterday's agreement.
"With this agreement we ensure that Maryland consumers will continue to have a choice of traditional department stores when they shop," Maryland Attorney General J. Joseph Curran Jr. said in a written statement.
James Sluzewski, a spokesman for Cincinnati-based Federated, said the agreement with state antitrust regulators was expected, given the large number of Macy's and Bloomingdale's stores that overlap in malls with May stores. He said this was the first time since at least 1995 that Federated had been forced to sell overlapping stores to a competitor to settle state antitrust concerns.
Federated said it would sell 75 stores nationwide.
Sluzewski said Federated hasn't decided what do with the Lord & Taylor brand.