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Macy Irons Out Some Wrinkles While Campeau Plans Strategy

March 21, 1988

NEW YORK (AP) _ R.H. Macy & Co. Inc. on Monday cleared some of the hurdles in the path toward winning Federated Department Stores Inc. while its rival, Campeau Corp. reconsidered its strategy following a major court defeat.

Separately, a federal judge rebuffed Campeau’s proposal that it extend its tender offer to expire simultaneously with Macy’s offer if he removed Federated’s poison pill takeover defense.

In a closed-door session, Judge Leonard Sand said the pill will stand at least until Federated makes a final recommendation to shareholders, said Campeau spokeswoman Nancy Raeside. ″He’s conceding that the pill is an auctioning tool,″ she said.

The judge scheduled a hearing for Wednesday regarding a Macy complaint that Campeau made false statements in full-page advertisements in Thursday editions of the New York Times and Wall Street Journal.

Macy announced that the waiting period during which the federal government could ask for information about the possible antitrust implications of a Macy- Federated merger had expired with no further requests. A request would automatically extend the waiting period.

The retailer also confirmed it had agreed to sell 11 of Federated’s 14 Abraham & Straus stores if it wins the takeover fight. The agreement, reached with New York state Attorney General Robert Abrams over the weekend, calls for A&S stores in the New York area to be divested because they are in direct competition with Macy branches.

In Georgia, where Macy stores would compete with Federated’s Rich’s chain, Attorney General Michael Bowers said the state will not oppose a Macy- Federated combination. Analysts have said, however, Macy might sell the Rich’s stores anyway.

Macy is conducting a $6.3 billion tender offer for Federated under an agreement with Federated management.

Meanwhile, Campeau was trying to decide how to proceed with its $6.18 billion offer for Federated following a federal judge’s determination that the retailer’s ″poison pill″ takeover defense could stand for now.

Margaret Nicolaides, a Campeau spokeswoman, said the Toronto-based developer was ″definitely working on other options.″ She said she could not elaborate on what those options were.

The Wall Street Journal reported Monday that the options Campeau was considering included sweetening its bid or proposing a friendly merger.

Campeau had contended the pill would prevent its bid from going forward. The defense makes a takeover prohibitively expensive by allowing Federated shareholders to buy more of the company’s stock at a steep discount.

Macy is offering $77.35 a share in cash for 70.43 million Federated shares, for a total of $5.4 billion. Macy would exchange shares in the merged company, Macy’s-Federated Inc., and issue convertible debt securities for the remainder of Federated’s 89.5 million outstanding shares. Analysts have estimated the total value of the offer at $6.3 billion.

Federated stock rose 62 1/2 cents to $66.87 1/2 in New York Stock Exchange composite trading Monday.

Campeau’s bid is a two-step, all-cash package that would be worth $68 a share, or $6.18 billion. It is offering $75 each for 70.5 million Federated shares, and proposes to acquire the remaining stock for $44 cash per share in a subsequent merger.

Macy’s offer expires at midnight EST April 4. The Campeau offer must remain open at least until midnight Friday, pending a Securities and Exchange Commission ruling on whether Campeau must submit documents on its financing for the takeover.

Federated’s divisions include Bloomingdale’s, Burdine’s, Filene’s, Foley’s, Lazarus and Rich’s department stores; Ralphs supermarkets; Gold Circle discount stores; and Main Street and Children’s Place specialty stores.

Macy owns nearly 100 department and specialty stores.

Campeau, which started in real estate development in Canada, moved into the U.S. retail market at the end of 1986 by acquiring Allied Stores Corp.

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