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Allied’s Centers, Bonwit Teller, Midwestern Stores Probably on Block

November 3, 1986

NEW YORK (AP) _ Campeau Corp. probably will sell Allied Stores Corp.’s five shopping centers, its Bonwit Teller specialty stores and some of its Midwestern department store divisions to reduce debt after it completes its multibillion- dollar acquisition of the huge retailer, analysts predicted Monday.

Allied announced Sunday it agreed to be acquired by Campeau for about $3.6 billion, ending a two-month takeover battle.

The merger agreement, which must be approved by shareholders of both companies, came after a federal judge last week allowed the Toronto-based real estate company to complete its open-market purchase of 48 percent of Allied’s outstanding stock.

Campeau, however, was prohibited from voting that stock.

Another suitor, Edward J. DeBartolo Sr., dropped his takeover bid over the weekend but retained first right of refusal to buy unspecified Allied operations and properties. DeBartolo is the nation’s largest mall developer.

Under the agreement, Campeau will pay $69 a share in cash and securities, or $1.76 billion, for the 25.5 million Allied shares it does not already own.

Allied’s stock rose 50 cents a share to close at $66.62 1/2 in New York Stock Exchange composite trading.

Robert Campeau, chief executive officer of Campeau, said he planned to sell some Allied assets to reduce debt caused by the merger, but he did not identify them.

Allied, which operates 665 stores in 46 states, had sales last year of $4.1 billion.

Joanne Legomsky, a retailing analyst with Standard & Poor’s Corp., said, ″The first thing to go would be the shopping centers.″

The five shopping centers - plus a sixth that Allied operates but does not own - are located in Washington, Massachusetts and New Jersey.

Monroe Greenstein, an analyst with Bear Stearns & Co., said: ″Clearly the shopping centers. They don’t need the shopping centers in the running of their business.″

If Campeau sells any Allied stores, it probably will sell them in a real estate packages of 25 to 30 stores, Greenstein said.

Miss Legomsky said: ″The other one would probably be Bonwit’s. They’ve never really gotten that show on the rod. It’s never really done what they expected it to do.″

Bonwit Teller, an apparel retailer, operates 15 stores nationwide.

″The Midwestern stores are probably more likely targets,″ Miss Legomsky added.

Allied’s Midwestern divisions are Donaldsons, in Minnesota; Block’s, in Indiana; Herpolsheimer’s, in western Michigan; and Heer’s, in Missouri. Together they operate 34 stores.

Divisions are being bought and sold throughout the industry, which has been undergoing a restructuring in recent years.

″The assets are being parcelled out to the most efficient operators,″ Miss Legomsky said. ″It’s a safety valve generating growth opportunities for other retailers.″

In addition, entire retailing companies have been acquired in recent months.

May Department Stores Co. of St. Louis purchased Associated Dry Goods Corp. last month, and R.H. Macy & Co. returned to private ownership through a leveraged buyout last summer.

Under the latest merger agreement, Allied will become a subsidiary of Campeau. Thomas Macioce will retain his posts as chairman and chief executive officer of Allied and will serve as Campeau’s chairman.

Robert Campeau, who had been his company’s chairman, will continue as its chief executive officer and is its majority shareholder.

Campeau also agreed to allow other Allied officers to continue in their positions at least three years and to ask Allied directors to join the Campeau board.

Campeau’s fight for Allied began in early September when it offered $66 for each Allied share.

Allied’s board rejected the bid, and later agreed to a friendly takeover by DeBartolo and Sacramento, Calif., investor Paul A. Bilzerian, who were offering $67 a share.

DeBartolo and Bilzerian will be paid more than $100 million in fees - including a $53 million ″break-up fee″ - and expenses associated with the deal they had struck with Allied.

Campeau, which already owned 4 percent of Allied stock, bought 25.8 million Allied shares, or 48 percent, on the open market for $1.73 billion on Oct. 24. However, U.S. District Judge Pierre Leval temporarily blocked completion of the purchase, which Allied had attacked as an illegal tender offer.