CLOVER BOGS DOWN EFFORTS TO SELL STRAWBRIDGE

Byline: Valerie Seckler

NEW YORK — A weak chain of Clover discount stores is bogging down Strawbridge & Clothier’s efforts to unload its 13 Strawbridge department stores as well as the 27 Clover units.
Sources familiar with efforts to sell the Philadelphia-based retailer said Tuesday that a run-up in the company’s stock price, coupled with a tepid offer for the underperforming Clover chain, have stalled the deal.
May Department Stores Co. and Federated Department Stores are reportedly interested in the Strawbridge units while Kimco Realty Corp. is said to have bid for the Clover locations.
“There is nothing to report at this time,” said Peter S. Strawbridge, president of Strawbridge & Clothier. He indicated talks are ongoing, however, saying: “We’ve never had a time frame in which we expected to complete a deal.”
When Strawbridge said in October that it had retained Peter J. Solomon as a financial adviser to explore a sale, merger or acquisition, the company’s stock was trading at $14 a share. Since then, it has nearly doubled in value, closing unchanged Tuesday at 26 3/8 in over-the-counter trading.
Sources said that if a deal is consummated, it won’t be any higher than today’s market price and could be significantly lower.
“I don’t know if a deal will happen,” said a person familiar with the situation. “Expectations often build up on Wall Street that are higher than reality.
“The U.S. is over-stored, and there aren’t that many discounters that can use stores the size of Clover’s,” the source added. Most of the units in the Clover chain fall below the 100,000-square-foot size sought by most discounters these days, he noted.
In addition, the source said some Clover leases bear “terrible liabilities” as poor performers with rents that are higher than what could be gotten from new tenants.
The question for Strawbridge, said sources, is what kind of return on investment their shareholders would get if the company failed to sell the business.
Efforts reportedly are under way to raise an offer made for Clover by Kimco Realty Corp., Hyde Park, N.Y., the nation’s largest owner of strip centers. If Kimco acquired the discounter, it would likely unload the units to a variety of players in and out of the discount store business.
Kohl’s Corp., Menomonee Falls, Wis., and Minneapolis-based Target Stores reportedly have shown interest in some of the Clover units, as noted.
The Kimco offer is said to be the only one made for the Clover chain.
Although May Co. reportedly is interested in most of the 13 Philadelphia-area Strawbridge units, Federated Stores is also said to be a player for some locations. May Co. now has a couple of Hecht’s in centers with Strawbridge stores that could interest Federated, as reported.
If a deal cannot be struck with May Co., Federated and Kimco, sources said it is possible that May or Federated would purchase all of Strawbridge & Clothier and do a tax-free spinoff of the Clover business.
May and Federated are seeking to build their presence in the lucrative Philadelphia retail market, where Strawbridge has the strongest department store business, according to sources.
While Strawbridge’s department store business is steady if not stellar, May Co.’s Hecht’s stores in that market are said to be doing poorly, and Federated’s presence in the Philadelphia area is about half that of the other two.
Strawbridge & Clothier plans to release its fourth-quarter and full-year results next Wednesday, the day it will hold its monthly board meeting. In 1994, the retailer earned $20 million, or $1.92 a share, on sales of $1 billion. — Fairchild News Service

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