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Wanamaker Will Be Sold by Carter Hawley : Analysts Estimate Value of Deal at $180 Million

November 05, 1986|MARTHA GROVES | Times Staff Writer

Carter Hawley Hale Stores, the Los Angeles-based parent of the Broadway and Neiman-Marcus, said Tuesday that it has agreed to sell its John Wanamaker department store division to Woodward & Lothrop, an old-line Washington retailer that has supplied such items as White House stationery and monogrammed towels for Air Force One.

Terms of the deal, which is subject to completion of a definitive agreement, were not disclosed, but analyst Robert F. Buchanan of the Dillon, Read & Co. investment house in New York estimated that Woodward & Lothrop would pay book value of $180 million as well as assume $29 million in related liabilities, including mortgages and long-term leases.

Woodward & Lothrop, which was first opened in 1880 in the nation's capital as the Boston Store by two former Bostonians, is a subsidiary of Taubman Investment Co., the investment arm of developer Alfred Taubman of Troy, Mich. One of the nation's leading developers of shopping malls, Taubman's firm paid $220 million for the 16 Woodward & Lothrop stores in 1984.

"(The deal is) very favorable from Carter Hawley Hale's standpoint," analyst Buchanan said. "The company will now be able to focus its efforts on the Western department store operations along with the specialty store operations."

Oldest Department Store

Buchanan estimates that the deal will add 20 cents a share to Carter Hawley's profit next year by reducing interest expenses. As a result, he has boosted his projection for 1987 earnings to $3.40 a share.

Wanamaker, a Philadelphia-area institution that claims to be the nation's oldest full-line department store, was put up for sale in July. The move was applauded by debt rating agencies and analysts, who noted that Wanamaker was the poorest performer of Carter Hawley's department store operations.

"It has been a drag on earnings," Buchanan said. According to a financial report about the company that circulated last summer, the chain had net income last year of $1.37 million on sales of $451 million, an improvement from the previous year's $506,000 loss on $428 million in revenue.

Both sides said the deal is expected to close by Dec. 31. It is subject to the expiration or early termination of the waiting period required by federal antitrust laws.

Carter Hawley has owned Wanamaker since 1978, when it bought the chain for $60 million from a Wanamaker family trust. In the last two years, observers said, Carter Hawley has made major strides in merchandising at the chain, which had developed a reputation for stodginess, but ultimately decided that it was unwilling to invest further in the operation when businesses closer to home needed attention.

Bill Dombrowski, a Carter Hawley spokesman, said the company intends to use the proceeds to "reduce long-term debt and accelerate store modernizations in our other divisions."

Reached in Washington, Edwin H. Hoffman, chairman and chief executive of Woodward & Lothrop, was reluctant to delve into the retailer's plans for Wanamaker but said it's "almost certain" that the Wanamaker name will be retained.

Analyst Buchanan speculated that Woodward & Lothrop, whose stores are primarily in the Washington and Baltimore areas, might spend as much as $50 million to turn Wanamaker into a big money maker.

The retailer last year devoted $20 million to renovating its flagship store at 10th and F Streets in Washington. Hoffman called the Wanamaker deal a homecoming of sorts. He served as the chain's president in 1967 and also noted that Waldo H. Burnside, Carter Hawley's president, formerly served as Woodward & Lothrop president under Hoffman.

Carter Hawley has been undergoing a restructuring in recent years to strengthen its balance sheet and bolster operations. Last April, the company sold its 16-store Holt Renfrew chain of Toronto, another marginal operation.

In 1984, the company successfully fended off a takeover bid by The Limited of Columbus, Ohio. In the process, it acquired a friendly investor in General Cinema, which now controls a third of the board and has preferred stock that would allow it to take a 38% ownership of the common stock.

In trading Tuesday on the New York Stock Exchange, Carter Hawley shares closed at $40.875, down $1.875, on volume of 367,200 shares.

Analysts said the decline did not reflect dissatisfaction with the Wanamaker deal but instead merely offset a sharp run-up on Monday, when the stock climbed $3.75 to a 52-week high of $42.75 on volume of 697,000 shares. Much of that volume was accounted for by institutional trades designed to take advantage of favorable tax treatment on dividends.

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