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(SACRAMENTO) – Attorney General Bill Lockyer today announced his approval of Federated Department Stores, Inc.’s (Federated) $11 billion purchase of May Department Stores Company after securing Federated’s agreement to address his anti-competitive concerns by divesting up to six more California stores than originally proposed.
“This merger represents one of the most significant developments to hit the Southern California retail market in the last decade,” said Lockyer. “Its potential effect on competition, prices, consumers and communities is substantial. The agreement with Federated aims to help preserve local economic vitality and restrain prices for shoppers by softening the transaction’s adverse effects on competition.”
Federated, the parent company of Macy’s, will divest at least 26 Macy’s and Robinsons-May stores in Bakersfield, Los Angeles, Riverside, San Bernardino, Santa Ana and other Southern California communities.
Federated on July 28, 2005 announced it would sell 22 of those stores, and the agreement calls for the divestiture of four additional outlets. They are located at: The Promenade at Topanga in Woodland Hills (Macy’s); Town Center in Simi Valley (Macy’s); Westminister Mall in Westminister (Macy’s); and Fashion Island in Newport Beach (Macy’s).
Two additional Southern California Macy’s stores also could be divested under the agreement. The facility at the Promenade in Temecula will be added if Federated reaches an agreement with Forest City Enterprises to expand the existing Robinsons-May at that mall. And the Macy’s Women’s Store at The Oaks in Thousand Oaks will be added if the site is not converted to a Bloomingdale’s.
The agreement is in the form of an “Assurance.” The Assurance was signed by Lockyer, and the Attorneys General of Maryland, Massachusetts, New York and Pennysylvania. It covers divestiture of stores in the signing states.
The agreement calls for Federated, in selling all divested outlets, to give priority to Macy’s and Robinsons-May’s traditional competitors in the department store market. The agreement defines those competitors to include Dillard’s, Gottschalks, Nordstrom, Neiman-Marcus, Saks Fifth Avenue, Saks Department Store Group, Bon Ton, Elder Beerman, Boscov’s, Belks, Proffitts, MacRaes and Von Maur.
The preference will work like this: Federated must accept qualified offers from one of the listed chains, even if Federated receives higher offers from other parties. Additionally, Federated must give similar priority to bids from mall owners or developers that include a binding “commitment or arrangement” to lease or sell the store to a listed chain. The Attorney General of the state in which the store is located must approve such sales to mall owners or developers.
Under another key provision of the Assurance, Federated can sell the divested stores only to buyers who commit to continue operating the outlet as a department store for no less than seven years. Divested stores cannot be bought by one of the listed chains if they already have a store within seven miles of the divested asset, unless the Attorney General of the state in which the store is located waives the restriction.
The Assurance specifies qualified offers will be based on each divested store’s “commercially reasonable value.” That value will be determined by an independent expert, who will retained by Federated, subject to approval by the Attorneys General.
If Federated does not receive a qualifying offer for any store to be divested, Federated no longer will be bound by the terms of the agreement with respect to that particular outlet. In such cases, Federated cannot subsequently sell the store for less than any bid submitted by one of the listed competitor chains, and must provide any listed chain that made an offer an opportunity to submit a higher bid.
Under the divestiture schedule specified in the Assurance, Federated must collect all bids no later than February 1, 2006, inform the winning bidders no later than March 1, 2006, and complete the sales before September 1, 2006.
A complete list of the California stores to be divested under Assurance is attached.
SOUTHERN CALIFORNIA STORES TO BE DIVESTED
Del Amo Fashion Center, Torrance
Fox Hills, Culver City
Glendale Galleria, Glendale
Los Cerritos Center, Cerritos
Main Place (North), Santa Ana
North County Fair, Escondido
Northridge Fashion Center, Northridge
The Oaks (South), Thousand Oaks
Pacific View Mall, San Buenaventura
Plaza Camino Real, Carlsbad
Santa Anita, Arcadia
Santa Monica Place, Santa Monica
University Town Center, La Jolla
Valley Plaza, Bakersfield
Victoria Gardens, Rancho Cucamonga
Galleria at Tyler, Riverside
Inland Center, San Bernardino
Lakewood Center, Los Angeles
Montclair Plaza, Montclair
Westfield, Palm Desert
Westfield, West Covina
The Promenade at Topanga, Woodland Hills
Town Center, Simi Valley
Westminister Mall, Westminister
Fashion Island, Newport Beach
The Promenade at Temecula, Temecula (conditional)
Women’s Store at the Oaks, Thousand Oaks (conditional)