Macy’s Reportedly Gives Federated Directors New Details on Bid

Directors of Federated Department Stores, battered by a two-month-long takeover war, listened Wednesday to rival bidders describe how they would take over and slice up the sprawling retailer.

Hoping to bring the takeover battle to a close, Federated’s board asked both Campeau Corp. and R. H. Macy & Co. to present their best and final offers.

The marathon session in New York continued into the night and there was no immediate announcement from Federated directors. But there were reports after the meeting was over that Macy’s had for the first time placed a price tag on its total bid.

Macy’s has offered $6.3 billion--$77.35 a share for 80% of Federated’s stock. The remaining 20% would be swapped for shares in the new combined Federated-Macy’s. On Wednesday, Macy’s reportedly valued the stock in the new company at between $68 and $70 a share--much higher than previous Wall Street estimates.

No matter what, big changes are ahead for Federated, which owns Bullock’s department stores and Ralphs Grocery. Both suitors have said they will sell the Southern California supermarket chain. And Federated has granted Macy’s an option to buy Bullock’s, Bullocks Wilshire and the I. Magnin department store chains.

Campeau has offered about $6.53 billion--$82 a share in cash for 80% of Federated’s stock and $37 a share for the remaining 20%.

Macy’s was reportedly represented by the retailer’s chairman, Edward Finkelstein, according to a story in today’s New York Times. The New York Times also reported that Macy offered Federated shareholders the option of receiving all cash or all stock for their shares, a move apparently aimed at stock speculators who preferred Campeau’s all-cash offer.

Macy’s offer is scheduled to expire next Monday. Campeau’s bid had also been set to expire at the time. But the Securities and Exchange Commission has told Campeau to hold open its bid until it has lined up all the financing that it needs to complete the takeover.

While Federated’s board met, rumors on Wall Street linked the Federated takeover to another takeover battle that is just begining to take shape.

Lucky Stores, which has received a takeover bid from American Stores, would give $300 million to Campeau to help finance the takeover of Federated Department Stores, according to reports that circulated among analysts and stock speculators.

The theory behind these reports was that if Lucky helped Campeau with its takeover, Campeau would return the favor. Specifically, should Campeau get Federated, it would be in a position to sell Ralphs supermarkets to Lucky. And, if Lucky bought Ralphs, it would be tough for American Stores to complete a takeover of Lucky.

Another report circulating on Wall Street had Lucky preparing to launch a takeover of American Stores itself.

These reports followed by a day a letter from American Stores Chairman L. S. (Sam) Skaggs that warned Lucky not to try to block its $1.7-billion takeover by buying another supermarket chain.

Analysts say the combination of American Stores’ letter and the reports about possible actions by Lucky triggered a decline in the price of Lucky stock. On the New York Stock Exchange, Lucky shares fell $1.50 to close at $48.375. Meanwhile, American Stores shares climbed $2.75 to $59.75

John B. Kosecoff, a retail analyst at First Manhattan Co., a brokerage house, was not impressed with the reports. “There is nothing that we know of to suggest that there is any validity to any of those rumors. We simply do not know,” he said.

The purchase of Ralphs would make Lucky “extremely unattractive, financially” as a takeover target, said supermarket industry analyst Edward Comeau at Wood Gundy Ltd., a brokerage firm. “It makes for a highly leveraged, messy situation.”

Campeau, Lucky and American Stores declined to comment on the speculation about possible actions by Lucky. Ralphs executives, who are trying to buy the company themselves, were not available for comment.

American Stores--the nation’s third-largest food and drug retailer with $14 billion in annual sales--wants to combine its Alpha Beta chain and Lucky supermarkets. The combined chain would be run by Lucky management and bear the Lucky name.

Lucky--the nation’s sixth-largest food retailer with about 500 stores--so far been unresponsive to American Stores’ overtures. Lucky’s management has been rumored to be trying to buy the chain itself. But analysts have said such a move would burden Lucky with too much debt.

American Stores has also gone to court to block Lucky’s anti-takeover defenses.

“American Stores has done nothing but turn up the heat,” Comeau said. “They have backed Lucky’s into the corner. Lucky has very little flexibility. They are scrambling for options.”