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Takeover Talk Sparks Heavy Trading in Retail

Amid continuing speculation, shares of Macy's Inc. and Target Corp. were again the focus of heavy trading volume Monday as their shares fell.

Amid continuing speculation, shares of Macy’s Inc. and Target Corp. were again the focus of heavy trading volume Monday as their shares fell.

TJX Cos. Inc. also experienced higher-than-usual trading activity on the Big Board.

Macy’s has been the subject of takeover speculation. The latest rumor on Monday had buyout firm Kohlberg Kravis Roberts & Co. eyeing the retailer. When Macy’s stock price first began climbing last month, it was because of rumblings that KKR, Goldman Sachs and Providence Capital were preparing a buyout bid of $52 a share.

On Friday, there were rumblings that billionaire investor Edward Lampert, chairman of ESL Investments, which bailed Kmart Holding Corp. out of bankruptcy and later engineered the merger of Kmart and Sears, Roebuck and Co., might seek to acquire the department store giant. The stock rose more than 5 percent.

Shares of Macy’s on Monday closed at $41.65, down 0.8 percent. More than 5.6 million shares were traded. The three-month average volume is 7.1 million, but that number is skewed higher because of Friday’s trading volume of almost 13 million shares.

KKR also was the subject of market whispers in connection with a possible deal for TJX Cos. Inc. While the rumors could not be substantiated, they fueled trading activity, particularly since speculation of a private equity transaction has been in the market for about two months. Last month, analyst Mark Montagna of C.L. King & Assoc. wrote in a research note that TJX is an attractive takeover candidate for private equity, and maintained his rating of the stock at “accumulate,” with a $33-a-share price target.

Shares of TJX climbed 3.7 percent on Monday to close at $29.22. More than 8.3 million shares were traded, compared with a three-month average of almost 3.4 million.

Target shares lost ground Monday, falling 2 percent to close at $66.72. Volume was in excess of 12 million shares, versus a three-month average of 8.2 million.

Shares of Target on Friday experienced intensely high trading activity as 27 million shares changed hands on speculation that activist hedge fund firm Pershing Square might file a Form 13D with the Securities and Exchange Commission to force the discounter to sell its credit card business.

Citigroup Global Market’s retail analyst, Deborah Weinswig, on Monday wrote in a research note: “We do not believe [Target] management is interested in selling the credit card business, as they believe it helps fuel growth of core retail operations. Given Target’s recent strong performance, we believe it would be difficult for an activist shareholder to push a sale of the credit card business.”

She estimated Target’s credit card business to be worth $6.8 billion, based on a 12.5 percent premium to the company’s credit card receivables balance of $6 billion at the end of the first quarter of fiscal year 2007. That premium is in line with recent credit card sale transactions, she wrote.