Campeau Corp. has stepped up pressure on Federated Department Stores with plans for a sweetened $5.75-billion offer to be made when Federated's board meets today to decide whether to sell or reorganize the company.
Federated, owner of Bullock's department stores and Ralphs supermarkets, said Monday that "definitive action" could be taken today on Campeau's expected cash offer of more than $65 a share as well as on other options. Campeau's latest offer was $61 a share.
"It's all coming to a head very quickly," said Monroe Greenstein, an analyst with Bear, Stearns & Co., a New York investment house.
Federated, based in Cincinnati, said in a statement that it has been talking with "a number of parties," including Campeau, interested in acquiring the company or buying Federated stock as part of a corporate overhaul. Federated added that it has urged all parties to make their best offers to the board today.
Campeau, a Canadian real estate developer, told Federated over the weekend that it planned to raise its offer again. The company was rebuffed after it boosted its offer to $61 a share, or $5.4 billion. Its original bid of $47, or $4.2 billion, was made just three weeks ago.
Critical of Campeau
Although Federated's statement seemed to indicate that a decision about the company is imminent, it was by no means certain that the retailer would agree to a takeover by Campeau.
In fact, Federated's actions Monday indicated the opposite. In thinly veiled remarks, it criticized Campeau's tactics. It also stepped up a war of words, issuing a barrage of releases assailing Campeau's track record as a retailer and showing strong support for Federated in Washington.
Federated noted that more than 2,000 jobs have been cut at Allied Stores and its divisions since Campeau bought the company for $3.5 billion just over a year ago. Moreover, Federated said, 1,310 jobs more are being cut at units that Campeau has sold off to help pay for its purchase.
In addition, Rep. Thomas A. Luken (D-Ohio), chairman of a subcommittee with jurisdiction over the Federal Trade Commission, said he will chair hearings in Washington on Wednesday that will focus on "the failure of the commission to do a thorough job of investigating" Campeau's bid for Federated.
The federal agency, responsible for determining whether a retailing industry merger would diminish competition, last week let pass a deadline without requesting further information from Campeau and Federated. William Guzick, an attorney for Federated, said that appeared to mean that the agency would not challenge Campeau's bid.
The companies' operations overlap in some markets, particularly New England and Florida. Through its Allied Stores subsidiary, Campeau operates Jordan Marsh and Maas Bros. in Florida, Jordan Marsh in New England and Stern's in New York. Federated owns Filene's in Boston, Bloomingdale's in New York and Burdines in Florida.
Pointing at Canada
Federated also released letters from two other Ohio legislators, Democratic Sen. Howard M. Metzenbaum and Republican Rep. Willis D. Gradison, urging U.S. officials to intervene in the takeover battle. Both legislators argued that trade agreements allow Canada to severely limit U.S. investment in Canadian firms but do not offer similar protection for U.S. firms.
"If the nationalities were reversed, the Canadian government almost certainly would block the takeover," Gradison wrote.
In what could be read as a warning to Federated employees, the company detailed the fallout from Campeau's purchase of Allied.
"A Campeau takeover of Federated also is likely to result in the dismantling of Federated's . . . headquarters and significant cutbacks at divisional headquarters" in such cities as Los Angeles and New York, the company said in a release.
In a statement at Federated headquarters last week, Metzenbaum also hit at the grass-roots effect a takeover might have, including the loss of jobs, tax revenues and community support should the Cincinnati headquarters be disbanded.
Despite these maneuvers, Federated's statement Monday indicated that the company "has a program prepared and is ready now to sit down and talk," said Thomas H. Tashjian, a vice president with Seidler Amdec Securities, a Los Angeles investment firm.
Leveraged Buyout Rumored
A Federated spokesman declined to name other companies with which Federated is negotiating.
Since Campeau's initial $47-a-share offer was made Jan. 25, names of several companies that might be interested in all or part of Federated have floated through Wall Street.
One persistent rumor has Federated negotiating a deal with Kohlberg Kravis Roberts & Co., an investment firm that specializes in buyouts of companies under siege by hostile suitors.
The rumors prompted Robert Campeau, chairman of the Toronto development company, to write Friday to Henry R. Kravis, a founding partner of Kohlberg Kravis, warning that Campeau would challenge such a deal in the courts, unless Federated gave Campeau a chance to compete with the offer.
In its statement Monday, Federated said its board would consider "the extent to which any purchaser may have taken action to discourage others from submitting proposals to the company."
A Campeau spokeswoman called the statement a "veiled reference to Campeau's letter to KKR" and said that Campeau believed its letter "was totally justifiable."
THE PRICE GOES UP FOR FEDERATED
Jan. 25: Canadian developer Robert Campeau's Campeau Corp. bids $4.2 billion, or $47 a share, for Federated Department Stores, the Cincinnati-based retailer that owns Bullock's department stores and Ralphs supermarkets.
Feb. 3: Campeau increases its bid to $5.4 billion or $61 a share.
Feb. 15: Campeau says it is prepared to offer more than $65 a share, or $5.75 billion.