May Wins Famed Department Stores in Bankruptcy Auction
Aug. 08, 1995
NEW YORK (AP) _ May Department Stores Inc. won the war of the ``white sale'' Tuesday, outbidding Federated Department Stores Inc. in its quest for the Woodward & Lothrop and John Wanamaker chains, two of the oldest names in retailing.
May and its bidding partner J.C. Penney Co. will pay about $589 million for control of 27 department stores and warehouses currently held by Woodward and its Wanamaker subsidiary. In all, counting bids from others for the assets not purchased by May and J.C. Penney, the total gross from the auction was estimated at $726.9 million.
The properties are considered prime retailing space in the nation's mid-Atlantic region.
``This is an important step for May because it allows them to get into Philadelphia and keeps the competition out of Baltimore and Washington,'' said Stephen Latz, a retailing analyst at A.G. Edwards in St. Louis.
During a federal Bankruptcy Court auction held Tuesday in New York, May and J.C. Penney offered creditors $460 million, about $20 million more than Federated's $439.1 million bid for the retailing chain.
The difference between the amount creditors get and the purchase price reflects costs after the deal. That would include legal fees, real estate expenses, payments for the goods now on store shelves and reimbursements to Woodward for money owed it by customers who bought on credit, according to Sandra Sternberg, a spokeswoman for Woodward.
The Federated group declined to raise its offer further and the May bid was accepted.
``May and Penny had deeper pockets than Federated and could afford to raise their bid,'' said Walter Loeb, president of Loeb Associates in New York. ``This is an important acquisition for May and they knew it.''
Woodward, known as Woodies, and Wanamaker have long been staples in the mid-Atlantic region, with 29 department stores covering much of the area between Philadelphia and Washington.
Wanamaker's, founded 134 years ago by Philadelphian John Wanamaker, was the world's first urban department store and created the now-common ``white sale,'' where linens and bedding are sold for discounted prices.
But Woodies and Wanamakers have languished in bankruptcy proceedings since January 1994, with creditors sanctioning the court-supervised auction of their stores.
A standing-room-only crowd of lawyers, creditors and financial analysts turned out for Tuesday's auction, which was expected to last through Wednesday.
Federated began the day by sweetening a previous offer by $84 million, proposing to give creditors $439.1 million for the properties. May and J.C. Penney Co. then proposed the winning bid, which Woodies accepted.
The deal must still receive bankruptcy court approval. Woodies will try to sell the remaining properties that were not included in the deal.
Federated and May have become the dominant department store companies in the United States over the past several years, largely through the purchase of weaker stores.
The May victory was a setback for Federated, which operates eight Macy's and Bloomingdale's stores in Virginia and Maryland. It had wanted to convert 11 Woodies stores to the Macy's name.
``We regret not getting the properties because they would have fit well with our current store mix,'' said Carol Sanger, a spokeswoman for Federated. ``However, while they were desirable, this was not a critical deal for us and certainly not one that would cause us to bid imprudently.''
For May, the deal gave it an increased presence in the Washington area, where it also operates 15 Hecht's stores, and allows it to move into Philadelphia, a much sought-after market.
``The deal is important for May because it gives them an entry into the Philadelphia market,'' said Karen Sack, a retail analyst at Standard & Poor's Corp. in New York.
Cincinnati-based Federated is the nation's biggest traditional department operator, with 354 branches and $6.04 billion in sales through the first six months of the current fiscal year. St. Louis-based May is the second-largest, with 315 stores _ not including the Woodies branches it will keep _ and $5.56 billion in sales. The sales figures include specialty store results.
Besides Macy's and Bloomingdale's, Federated store names include Bon Marche, Bullock's, Burdine's, Goldsmith's, Jordan Marsh, Lazarus, Rich's and Stern's.
Besides Hecht's, May's stores include Famous-Barr, Filene's, Foley's, Kaufmann's, Lord & Taylor, Meier & Frank, and Robinsons-May.