NEW YORK — The third time’s the charm for The Bon-Ton Stores Inc.Perseverance paid off as the retailer said Tuesday that it entered into a “definitive merger agreement” providing for its purchase of The Elder-Beerman Stores Corp. for $92.8 million. The assumption of about $110 million in debt puts the deal just over the $200 million mark.In its third attempt to buy its fellow regional department store, York, Pa.-based Bon-Ton on Monday provided the winning bid when, as reported, it upped the ante to $8.00 a share, or a 20 cent premium, to Wright Holdings’ $7.80 offer on Friday. While an acquisition of Elder-Beerman has been in the works since May, Wright and Bon-Ton have been trading barbs and bids since Bon-Ton entered the bidding for the Dayton, Ohio-based department store group in July.Bon-Ton said that the merger has been approved by the boards of directors of both companies. The retailer said it will promptly commence a cash tender offer for all outstanding shares of Elder-Beerman, followed by a second step merger of Elder-Beerman by a Bon-Ton subsidiary. Completion of the offer is contingent on the tender of at least two-thirds of the outstanding Elder-Beerman shares on a fully diluted basis, availability of the proceeds of the financing under previously received commitment letters and applicable regulatory approvals.Under the arrangement, Elder-Beerman would become a subsidiary of Bon-Ton.Tim Grumbacher, Bon-Ton’s chairman and chief executive officer, said in a statement, “We are very pleased to have the opportunity to merge these two strong retail companies. The strategic and operational potential of this business combination is exceptional and the ability to add value to our shareholders is very compelling.“The companies have a similar customer base and comparable merchandise offerings, as well as little or no geographic overlap. We look forward to expanding our partnerships with the vendor community, banks and other business partners, as we work toward the common goal of maximizing the potential of this acquisition.” Bon-Ton operates 72 stores, principally on the East Coast, while Elder-Beerman’s 68 units are centered in the Midwest.Shares of Bon-Ton on Tuesday closed at $8.50, up $1.01 or 13.5 percent, in Nasdaq trading. Elder-Beerman saw its shares dip by 17 cents, or 2.1 percent, to close at $7.94 on the Nasdaq.Even with their decline on Tuesday, Elder-Beerman shares have enjoyed a remarkable run-up since the store said in May that it was engaging in exclusive talks with an unidentified party, which would turn out to be Wright. Shares moved from $3.34 to $4.70 on the initial flurry of news in mid-May and have effectively increased 137.7 percent in just four months.An Ohio-based firm called EB Acquisition that expressed interest in the store just days after Elder revealed it was having the exclusive acquisition talks, made an offer of $5.50 a share in early June. A week later, Wright was revealed as the previously unidentified suitor when it made an offer of $6 a share. It appeared that the offer, which had the support of Byron “Bud” Bergren and other members of senior management, would stand until Bon-Ton bid $7 a share at the end of July. Wright raised the ante to $7.05 last week, followed in short order by a $7.25 offer from Bon-Ton and what appears to be Wright’s final offer of $7.80 a share last Friday.Bergren and chief financial officer Edward Tomechko were expected to become minority owners of the store had Wright succeeded in purchasing the store. Wright Holdings is owned solely by Marathon Fund Limited Partnership IV, a private investment fund managed by Goldner Hawn Johnson & Morrison. Wright received written commitments from Marathon and affiliates of Fleet Financial Group to fund the merger and provide working capital. Calls to Michael Sweeney, managing director at Goldner Hawn Johnson & Morrison, for comment were not returned. In accordance with the terms of its earlier merger agreement with Wright, Elder-Beerman said it will pay Wright a break-up fee of no more than $4 million.Richard Hastings, credit economist at Bernard Sands, observed that the merger represents a continuation of recent trends. Low interest rates, the search by investment banks for higher yields, the improvements in the stock markets since April and “low stock valuations especially for department stores have fueled the basis for [a] series of major mergers in the retailing and apparel vendor arenas.”The merger also demonstrates, according to Hastings, “the need to increase buying volume to gain access to the largest and most efficient global sourcing partners, reduce distribution costs through consolidated distribution systems and a perceived opportunity to build stronger market presence for the middle-market consumer.”In addition, Hastings noted, the merger points toward additional consolidation in the department store segment where top-line growth is limited and expansion is generally expensive with long periods until stores pay for themselves.For Elder-Beerman, the latest move marks a significant chapter in its history.The department store was in bankruptcy from 1995 through 1997. Despite an earlier move by shareholders to shake up the store’s management, and despite the ongoing takeover drama this year, it has been able to maintain relatively stable sales trends since its exit from bankruptcy proceedings.Retailers, Hastings said, tend to have difficulties surviving their post-bankruptcy days. Yet, Elder-Beerman’s management was successful in “maintaining the enterprise value of Elder-Beerman for more than five years post-bankruptcy, an impressive accomplishment especially during a time of tough competition in regions resulting from the expansion of Kohl’s and various specialty apparel chains,” the economist said.

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