Federated Department Stores has agreed to buy May Department Stores Co. for $11 billion, creating the second largest department store company in the U.S.
The combined companies will operate more than 1,600 stores in 49 states, Guam, Puerto Rico and the District of Columbia bringing in $31.2 billion in sales.
Federated is the owner of Macy’s and Bloomingdales. May includes the Lord & Taylor chain and Marshall Fields.
The deal is expected to close in the third quarter.
Federated said that it expects to realize $450 million in cost savings by 2007 through the consolidation of central functions, division integrations and the adoption of best practices across the company.
“In today’s retail environment, competition comes from every conceivable retail format,” said John Dunham, May’s president and acting CEO, in a statement. “To succeed, we have to operate more efficiently and compete more effectively against players at all levels of the retail demographic.”
Plans call for merging May’s St. Louis corporate headquarters into its Cincinnati and New York offices beginning this year, and to make St Louis the headquarters of one of the major operating divisions going forward to tap key talent, the companies said.
No store name changes are expected before next year, but most likely May stores will be converted to Macy’s. Macy’s has been rebranding its own regional hyphenated-named stores all under the Macy’s brand in an effort that was to be completed this weekend.
“Operating regional stores primarily under one brand means we can advertise nationally, unlike regional retailers, which is more cost effective,” said Terry J. Lundgren, Federated’s chairman, president and CEO, in a statement.
The companies cited a number of benefits to the deal including lower costs for consumers, cost-efficient national marketing initiatives, the potential to expand private label brands and the expansion of customer loyalty programs.
Federated has 111,000 employees, while May employs 132,000.
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