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How Campeau Won Federated : Epic Battle Affected Lives and Livelihoods of Thousands

June 12, 1988|MARTHA GROVES | Times Staff Writer

NEW YORK — They called it Store Wars, and the casualty list keeps growing.

To date, more than 4,000 jobs have been lost at some of the nation's best-known department stores. Chains like Brooks Bros., Bullock's, Ralphs and Bloomingdale's have been bought, sold and traded like so many baseball cards.

Giant Federated Department Stores, a company that set the pace for much of retailing in the '60s, '70s and early '80s, is history. What's left of the company is now owned by a forceful French-Canadian developer, Robert Campeau, who is already reshaping the retailer in ways that will be felt by American shoppers in the '90s.

Son of an auto mechanic, school dropout at 14, one-time factory worker, real estate magnate and takeover artist extraordinaire, Campeau swooped down on Federated Department Stores on Jan. 25. Ten weeks and an epic battle later, on April Fool's Day, he succeeded in winning it.

How did the deal come about? What happened in New York and London and Toronto during those 10 weeks that enabled Campeau to emerge victorious? How did a $4.2-billion offer push its way to nearly $7 billion before the fighting was done?

And how did the deal twice slip through Campeau's hands before it was finally sealed with a bottle of fine French champagne at a New York townhouse?

It was at first a battle of wills between a cautious and perhaps contemptuous Federated that thought it had little to fear from Campeau, who first spoke up with nary a penny of financing. But by the end, Federated became little more than the object of desire as it watched Macy's and Campeau fight over the pieces.

With this deal, Campeau, a tough, unorthodox executive with a big ego and enormous drive to build an empire, has touched thousands of lives, not always for the better. The takeover is symptomatic of today's corporate America, where workers' livelihoods are often sacrificed in the name of efficiency and the megabuck deal.

In recent interviews in New York, more than 20 investment bankers, lawyers, publicists and executives discussed the deal's genesis and behind-the-scenes evolution. What emerges is a portrait of a man with guts and vision who surrounded himself with strong-minded lieutenants to do battle with equally determined opponents.

The argument could be made that all three companies--Federated, Campeau Corp. and R. H. Macy & Co., a rival bidder--won by losing or, conversely, lost by winning.

Federated lost its independence but garnered a terrific price for shareholders. Macy's lost out on Federated but walked away with coveted California properties. And Campeau won his quarry but now must make a go of a mammoth retailing organization at a time when retail sales are hurting.

Litany of Lost Jobs

The 64-year-old Campeau pursued Federated with a single-minded zeal and the energy of a much younger man, typically phoning advisers at 3:30 in the morning. He was like a gambler going for broke, selling off his favorite pocket watch and his mother's silver for the sake of squelching a formidable competitor.

"When we realized that he had an unlimited budget and was prepared to exceed it, our job turned into a challenge of capturing an advantage from this unusual situation to gain a desired and sensible result for our client," said Peter D. Goodson, a Macy's investment adviser at Kidder, Peabody & Co.

To Campeau watchers, the litany of lost jobs reads much like an earlier one, after he launched his retailing career with the controversial, $3.5-billion purchase of Allied Stores in late 1986. In that deal, advisers urged Campeau to launch a hostile "street sweep" of Allied shares, and literally overnight he bought enough shares on the open market to control the company. Afterward, thousands of jobs were lost as Campeau trimmed ranks and sold divisions.

Unsated, Campeau set his sights on Federated. The price of success was high--$6.6 billion officially, but more like $8.8 billion by Campeau's own reckoning of the total price tag. The marathon deal set records as the largest outside the oil industry and the largest successful hostile bid.

For Campeau's strategists, the deal entailed round-the-clock meetings, missed vacations and stressed-out family lives. But ultimately the takeover also meant fat fees (at least $60 million for the investment banks alone) and rich bonuses for the already well-paid individuals involved.

"One could say it was a hell of a price to pay for Bloomingdale's," one Federated source would say later.

Admirers and foes alike describe Campeau as by turns demanding and charming, mercurial and charismatic. "He is a very intense man," said Allen Finkelson, a Campeau attorney and close friend. "He feels the pressure like all of us. If he's angry, he lets you know it."

But after a blowup, Finkelson added, "he's also quick to apologize."

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