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Canadian Real Estate Firm Offers to Buy Allied Stores

September 05, 1986|NANCY YOSHIHARA | Times Staff Writer

A Canadian real estate company made a $2.7-billion offer on Thursday to acquire Allied Stores, the owner of Brooks Bros., Bonwit Teller and Ann Taylor specialty stores as well as major department store chains in Florida, Texas and the Northeast.

Campeau Corp., a publicly held development firm based in Toronto, proposed the merger, offering a combination of cash and securities worth $58 a share for all 47 million outstanding shares of Allied. Stockholders would get 80% of the offer in cash and the rest in preferred stock, the company said.

The Canadian firm, apparently seeking to keep Allied management in place, also pledged to honor all employment contracts, and--almost in the style of a management buyout proposal--offered managers a 15% interest in a new merged company.

Allied became the latest takeover target among retailers. In the last few months, for instance, May Department Stores of St. Louis successfully bid for Associated Dry Goods; Safeway is being acquired by Kohlberg Kravis Roberts & Co.; Pacific Lighting acquired Thrifty Corp., and R. H. Macy & Co. went private.

Operates 665 Stores

In all, Allied has 665 stores, including the Jordan Marsh department stores in New England and Florida, Joske's in Texas, Stern's in the New Jersey and New York area and the Bon in the Pacific Northwest. Allied, with revenue of $4.14 billion, dwarfs Campeau, which had revenue of $154 million last year.

Thomas M. Macioce, Allied chairman and chief executive, responded in a terse statement, saying that "we appreciate Campeau's well-founded interest in Allied. Its unsolicited proposal to negotiate a merger between Allied and a Canadian real estate firm will be dealt with in due course, consistent with the best interests of our shareholders."

Allied's stock soared on the news, closing on the New York Stock Exchange at $59.37 1/2 a share, up $10.75, on a volume of 2.9 million shares, which made it the fifth most active stock of the day.

The market's reaction gave credence to the analysts' assessment that Campeau's bid for Allied was too low.

"It is worth a lot more than $58; it's closer to $68 a share," said Robert Raiff, an analyst with the New York brokerage of Cyrus J. Lawrence Inc.

Walter Loeb, an analyst with Morgan Stanley & Co. in New York, also agreed that the bid was undervalued.

"I think the company (Campeau) is more interested in the real estate than in the merchandising. Allied probably wants to remain independent. They have a strong leadership, and Macioce, being a lawyer, will find a way to remain independent."

Undervalued Properties

Allied is a big property owner as well as a retailer, and analysts say its properties are worth far more than what is reflected in their book value. Loeb at Morgan Stanley said Allied's shopping center assets could be sold for $500 million.

Robert Campeau, the Toronto firm's 62-year-old chairman and chief executive, said in a statement released in Canada that "this proposed transaction would enhance the long-term growth potential of our company as a result of both the substantial income stream generated by Allied's retailing business and significantly expanded opportunities we will have in retail real estate across the United States."

The Canadian developer has been active in Northern California. It opened a 42-story building at 333 Bush St. in San Francisco's financial district in June, 1985. It also recently completed a 120,000 square foot building in the Oakmead-San Jose Business Park in San Jose. It also has another project at 250 Executive Park Blvd. in South San Francisco.

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