CINCINNATI - Federated Department Stores Inc. is buying rival May Department Stores Co. for $11 billion in cash and stock in a deal that would create a powerhouse better able to compete against discounter Wal-Mart Stores Inc. and upscale merchants.
The deal announced Monday would bring together the operator of Macy's and Bloomingdale's with May, a company known for its Marshall Field's and Lord & Taylor chains, creating a company with nearly 1,000 department stores and $30 billion in annual sales.
Federated Chairman, President and Chief Executive Terry Lundgren said the deal would give Federated a presence across the country, adding key markets such as Chicago, Denver, Minneapolis and St. Louis.
By doubling in size, the combined company will be able to roll out national marketing initiatives, expand the best store label merchandise collections of both companies and roll out some of Federated's successful store initiatives, such as larger fitting rooms, to May's department stores. The merger is also expected to wield more clout with vendors.
Federated would not say how many jobs will be cut because of the merger or what the company would do in cases where it and May have stores in the same mall. Federated operates the Macy's store at Augusta Mall. May has no stores in Augusta.
The company wants to hear what government regulators will have to say about whether and how many overlapping stores will have to be closed, Mr. Lundgren said.
The Smith Barney financial services firm estimates that 94 malls have stores with Federated and May nameplates.
Ultimately, Federated plans to put the Macy's name on most of May's regional department stores, as it is now doing with its own regional chains, including Lazarus, Rich's and Burdines.
The merger should have benefits for shoppers, one industry analyst said.
"For consumers, this will create sharper price points and better fashions that will help bring back shoppers away from other full-price department stores and discounters," said Burt Flickinger III, the managing director at Strategic Resources in New York.
But another analyst said it was "bad for the industry, for the vendors and for the consumers." Dan Hess, the president and chief executive of Merchant Forecast, a New York-based independent research company, said consumers will get fewer options and will be harder for some smaller suppliers to break into the merged entity's new vendor structure.
THE DEAL: Federated, the parent of Macy's and Bloomingdale's, offers $11 billion in cash and stock for May, operator of the Lord & Taylor's, Marshall Field's, Hecht's, Foley's, Filene's, Strawbridge's, Kaufmann's, Famous-Barr and L.S. Ayres chains.
TIMETABLE: Assuming shareholder and regulatory approval, Federated hopes to complete the takeover in the third quarter.
OUTLOOK: Federated plans to rename many stores as Macy's, creating a nationwide chain. Details of job losses and store closings have not been released.
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