NEW YORK — Federated Department Stores reached an agreement Monday with the state Attorney General, agreeing to sell six New York City area stores in exchange for the official’s agreement not to block the merger with R.H. Macy & Co.
The agreement to sell the stores — two Abraham & Straus, two Stern’s, one Macy’s and one Bloomingdale’s — comes one month after the two sides began negotiations and just 10 days before Federated is scheduled to have its amended disclosure statement approved by Bankruptcy Court Judge Burton R. Lifland.
The agreement erases the last hurdle to the merger. With all sides in the Macy Chapter 11 aligned behind Federated’s $4.1 billion proposal, it appears that the approval of the disclosure statement Sept. 29 and the mid-December approval of the plan of reorganization will be a breeze.
Under the agreement in principle between Attorney General G. Oliver Koppell and Federated, the retailer agreed to put the following stores on the block: A&S, Sunrise Mall, Massapequa; A&S, 33rd Street, here; Macy’s, White Plains; Bloomingdale’s, Garden City; Stern’s, Flushing, and Stern’s, Brookhaven Mall, Lake Grove.
“We always understood it was a tough case, with Macy’s in Chapter 11,” Koppell said at a press conference.
On Aug. 23, just three weeks before a hotly contested primary election he would eventually lose, Koppell announced he would seek to block the merger unless Federated sold all 12 New York area Macy stores — including the Herald Square flagship.
If Federated did not agree to sell the 12 stores, representing 5.4 million square feet of selling space, Koppell threatened to file suit to force the sale.
In the six-store agreement signed Monday, Federated will have to sell half as many stores, but just 1.47 million square feet, or 27 percent of what Koppell had originally demanded.
The two sides also agreed that:
Federated will, for five years, run a formal vendor fair here, to give new or small vendors the opportunity to sell the chain.
Federated will keep its 300-person buying office, 50-person executive office and Macy’s 1,000-person buying and product development offices in New York, although it did not agree to maintain the current staffing levels.
For the first year following the merger, Federated will not have to sell the stores at less than book value and, for the second year, the stores will not be sold for less than 90 percent of book value.
The stores will be sold to an operator of traditional department stores, specialty stores or mass merchandisers.
Any purchaser will offer existing employees jobs at similar pay and benefits.
“This agreement vindicates our earlier position that the merger would substantially give Federated a controlling share of the department store business in four communities,” Koppell noted.
Koppell said the agreement lessens Federated’s clout in Manhattan, Queens, Long Island and in Westchester, the chief areas of concern for him and his staff.
The agreement doesn’t bar Federated from closing other stores in the area. A updated plan for store closings and possible layoffs is expected to be filed in bankruptcy court later this month.
The agreed-upon closings provide little hardship to Federated, an analyst noted. “In many of these cases, these are stores Federated would want to get rid of for business reasons,” said Isaac Lagnado, a consultant and publisher of the Tactical Retail Monitor. “The stores are flashy closings that allow the Attorney General to declare victory and go home.”
Lagnado said three of the six stores are freestanding buildings, which he called “unwieldy and about a generation old.” Others, he said, are laggards in productivity, in poor locations or in areas that are turning into mass merchandising centers.
Federated will still operate other units in these markets. For example, it will be left with an A&S, Stern’s and Macy’s in the Roosevelt Field mall in Garden City, a Macy’s and a Stern’s at Sunrise Mall, and an A&S and Macy’s in Smithhaven Mall, which is close to Brookhaven Mall.
— Fairchild News Service