Raleigh Stores Corp. yesterday announced it has agreed to buy the 10-store Garfinckel's chain from Allied Stores Corp. for $95 million.

Raleigh Chairman Neal J. Fox said he planned to run the 12-store Raleigh's chain and Garfinckel's as separate entities after the merger is completed -- probably six weeks from now.

The merger will unite two longtime Washington institutions into the hands of Fox, a relative newcomer who bought the Raleigh's chain three years ago from the Lansburgh family, which had owned the stores for more than 32 years.

Fox said, "We will continue to operate {Garfinckel's} as it was in the past; no changes are currently anticipated."

"Raleigh's will remain Raleigh's, and Garfinckel's will remain Garfinckel's," he said in an interview. "We will try to make each better and focus on becoming a dominant and better specialty retailer with service."

Fox added that he had "no plans to do anything at this stage of the game" with Garfinckel's flagship store at 14th and F streets NW "other than to continue to run it as Garfinckel's."

Fox hinted that some changes may occur in the future, noting that the store -- which he will acquire as part of the sale -- is a large one with less than half of its 371,000 square feet of space currently devoted to retail operations.

Nonetheless, he added, he remains "committed to the east end of downtown" -- the old downtown retail core that stretches from 15th to 10th streets along F and G streets NW. "It is the most viable downtown in America; I don't see how you can stay alive and grow without being in the east end of downtown," he said, noting that he is looking for a site for a flagship store for Raleigh's in the old downtown corridor.

Fox, 42, started his retail career at Brooks Brothers. In 1966, he joined Neiman-Marcus, where he eventually became senior vice president in charge of merchandising. In 1975, he was appointed executive vice president of Bergdorf Goodman in New York. A year later he moved to I. Magnin, where he was senior vice president until 1981, when he left to head a luxury leather goods store in Manhattan.

Along with New York investor Ira J. Hechler and Indianapolis real-estate developer Mel Simon, Fox purchased Raleigh's in 1983 and started to revamp the conservative retailer that had catered primarily to members of Washington's male establishment into a more stylish clothier, one that carried, among other things, apparel for Washington's working women.

Last year, Fox sold the site of Raleigh's flagship store on Connecticut Avenue NW to a developer for $7.5 million. The developer is building a larger structure that is to include office space and a smaller Raleigh's store when it opens. Shortly after the store sale, Fox bought out his partners and became the sole owner of Raleigh's.

Fox's acquisition team included Raleigh's chief financial officer Russell Solt and Joseph H. Santarlasci Jr., an investment banker who served as vice chairman of Dart Drug Stores Corp. from June 1985 to October 1986, according to sources. Fox declined to identify other major parties, saying only that they were major financial institutions.

Yesterday's announcement of the Raleigh's-Garfinckel's merger ends months of speculation about the fate of the chain, which was put up for sale in January after Allied Stores had been sold to Canadian real estate developer Robert Campeau for $3.5 billion.

To reduce the debt incurred from the sale, Campeau put 16 Allied divisions up for sale. With the announcement of Garfinckel's sale, Campeau has now sold 11 divisions for more than $600 million. Campeau said yesterday he expected to sell the remaining divisions "in the near future," including the Richmond-based Miller & Rhoads department store chain.

Sources close to the bidding said Campeau was disappointed at the prices offered for Garfinckel's when the final bids were submitted in early May.

Campeau had been seeking at least $100 million but the final bids "with the exception of one low one, were in the low-to-mid-$80 million range," one bidder said. "All the talk that then ensued was over money," with Campeau seeking higher bids.

In addition to Fox, other bidders included Washington developer Oliver T. Carr and the Bass family of Texas, which was working with the local investment house Johnston, Lemon & Co. Both Carr and the Bass-Johnston, Lemon bids were made in cooperation with Garfinckel's senior management team, including president Hanne Merriman.

Part of Garfinckel's attraction was its real estate holdings, which included the Landover mall store and its Lanham warehouse as well as the valuable downtown store, which some bidders figured was worth at least $40 million. The retailing operations were "marginally profitable," one bidder said, noting that last year Garfinckel's earned $4.3 million on sales of $118 million.

Given the attraction of the downtown store, some bidders privately said they planned to remodel the store into offices, prompting District officials to consider an effort to have the store declared a historic building -- a move that could hamper a developer's plan to alter it.

District officials could not be reached yesterday to determine if they were still considering seeking historic status for the Garfinckel's building, which has operated at the 14th and F street site for the past 47 years.

Nonetheless, local retailing officials yesterday praised Campeau's decision to sell to Fox because it meant the chain would return to a local owner.

"I'm glad to see someone local get it," said J. Warren Harris, chairman of Hecht Co. "He will understand the market and help protect Garfinckel's image that it has had over the years."

From the day Garfinckel's was put on the auction block, Fox has been very open about his strong desire to buy the chain. "I'm a professional retailer who has lived all my life in better specialty retailing, from Brooks Brothers to Neiman-Marcus to I. Magnin. Garfinckel's is one of the preeminent specialty stores in the country," he said.