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Few See Dillard Making a Play for R.H. Macy

NEW YORK -- Amid reports that Fidelity Investments continued to pitch its stake in R.H. Macy & Co. to retailers, there was widespread industry speculation Thursday doubting that Dillard Department Stores will make a play for the chain.<BR><BR>In...

NEW YORK — Amid reports that Fidelity Investments continued to pitch its stake in R.H. Macy & Co. to retailers, there was widespread industry speculation Thursday doubting that Dillard Department Stores will make a play for the chain.

In addition, several members of Macy’s board will meet today for an “informational” session.

One source close to the situation noted that some of the big guns on the board, such as Laurence Tisch, chairman of CBS, and Gary Wendt, chairman of General Electric Capital Corp., won’t attend, although Federated Department Store’s interest in Macy’s will be addressed.

While Fidelity met with Dillard’s Thursday, sources do not expect the Little Rock, Ark.-based organization to launch a counter-bid

for Macy’s, either alone or with Fidelity.

“I think it’s smoke,” said one source. “They might want to pick up a few stores, but it’s unlikely that Dillard’s is interested in the Northeast.”

Added another source, “Dillard’s approached Macy’s six months ago. If they were going to make a bid, they wouldn’t need Fidelity.”

Frustrated by the slow pace of Macy’s Chapter 11 case, Fidelity is actively attempting to sell its $500 million secured claim – the largest single claim against Macy’s – trade sources said.

If Dillard’s isn’t interested, the Fidelity stake could go to Federated, which has already acquired $500 million of Prudential Insurance Co.’s $1 billion secured claim.

Dillard’s, along with May Department Stores, has reportedly expressed interest in purchasing Macy branches around the country if Macy’s is broken up in the course of its reorganization.

But Macy’s appears undaunted by the takeover rumors, and Myron E. Ullman, its chairman and chief executive officer, was said to have told creditors Thursday that he still intends to present a reorganization plan this spring.

His position may be buoyed by recent figures. According to sources, Macy’s had a 1.7 percent comparable-store sales gain for December, adjusted for the discontinuation of its electronics business, according to a creditor source. Macy’s, however, said the figure was inaccurate, but declined to give any other numbers. The company, which will report December’s results later this month, is also expected to state cash flow is improved.

On another front, Macy’s is expected to ask the bankruptcy court for an extension of its exclusive right to file a plan, which expires March 15.

“Right now Ullman is hiding behind the bankruptcy law,” said one source. “They’ll get an extension, but not a very long one, so Ullman better come up with the goods. I honestly believe that he wants to run this company and bring it out of Chapter 11.”

The source added, “However, Ullman is beginning to lose flexibility in his ability to form his own plan because the rumors are taking on a life of their own.”

Robert Miller, counsel for the bondholders’ committee, said his group would consider any offer for a plan, as long as it was a “full-face offer,” meaning a good return on the dollar.

“It will be a cold day in July when Ullman or I allow this company to be stolen,” Miller said.

Said one observer, “Most likely, the board will tell Mike, you have our confidence, and maybe Mike will present to them a faster exit from bankruptcy, 1994 instead of 1995. I don’t think the board is ready to jostel things. They don’t want to crowd Mike. He’s feeling a lot of pressure right now. The board has been supportive of him, and he has produced for them.”

“The thing Mike has on his side is an understanding board and Judge Lifland,” added Isaac Lagnado of Tactical Retail Solutions, referring to Burton Lifland, who is the presiding judge in the Macy bankruptcy case.

Lagnado added, “The chances are 9-to-1 that he’ll give Macy’s an extension. He does not want to preside over the breakup of companies. That’s been his track record, and that’s the trump card for Macy’s.”

Up to now, Federated’s trump card seemed to be its shrewd surprise attack, announced Sunday, which put it in a strong takeover position. Since Tuesday, however, Federated has apparently retreated from the media blitz it launched when it announced its intentions.

Observers say Allen I. Questrom, Federated’s chairman and ceo, is determined to get more out of Macy’s than just the Bullock’s division in California.

“There’s not really a whole lot Macy’s can do.” said one analyst who specializes in distressed securities. “Whoever has the Fidelity claim on their side has the company.”