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Icahn to Boost Stake in Retailer

The billionaire investor says Federated is undervalued and seeks to acquire as much as $500 million in shares.

September 28, 2006|From Reuters

NEW YORK — Billionaire investor Carl Icahn plans to increase his stake in Federated Department Stores Inc. and will meet with the retailer to talk about ways to "enhance value" at the owner of Macy's and Bloomingdale's, he said Wednesday.

"We intend to meet with them over the next week and discuss some ideas we have to enhance value," said Icahn, who is known for pressuring management to improve performance in companies he holds. "It's as simple as that. This is pretty friendly."

Icahn declined to elaborate on his proposals for Federated, except to say that the company had "great real estate values" and that it was "undervalued."

The announcement comes after Federated disclosed earlier in the day that Icahn would file for clearance to acquire $113.4 million to $500 million of additional shares of the retailer.

The news sent Federated shares up 5% to a new 52-week high of $43.90 before falling back to close at $42.42.

Icahn Management held more than 2 million Federated shares as of June 30, according to a filing with the Securities and Exchange Commission.

Buying $500 million of stock at $43.90 a share would represent a purchase of almost 11.4 million shares. Federated has 544 million shares outstanding, according to Reuters data.

Federated's shares have risen more than 25% this year through Tuesday as the retailer integrated its $11.7-billion purchase of May Department Stores without major hiccups.

It converted 400 former May stores into Macy's this month, creating a national chain of more than 800 Macy's stores, which is expected to boost its sales and give it more sway with advertisers and vendors.

"I just think it's undervalued," Icahn said in an interview of his decision to buy more shares. "There are some great real estate values there. I think the company has done a good job."

In a statement, Federated's chairman, president and chief executive, Terry Lundgren, said the retailer was glad Icahn saw value in the company and was increasing his stake.

Scott Vergin, a portfolio manager at Thrivent Financial, said the timing of Icahn's announcement was unusual given that the merger integration and store conversion seemed to be going well.

"Usually it's in a failed situation where somebody like that steps in," he said. "Everything we hear is that [the integration] is going better than planned."

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