The boards of Federated Department Stores Inc. and R. H. Macy & Company gave their formal approval yesterday to a merger between the two department store operators.
But the two companies did not make any announcement because their lawyers were still hammering out differences over the interpretation of technical details before executives sign the agreement. None of the differences are expected to derail the merger, however, representatives for the companies said yesterday.
The merger will pave the way for Macy to emerge from bankruptcy protection later this year under Federated's umbrella, which also embraces Bloomingdale's, Abraham & Straus, Rich's and several other regional department store chains.
The approval by the boards was mostly a formality. The companies will file a disclosure statement later this month that will offer at least a glimpse of how the combined company will look, perhaps including which stores will be closed or sold and how many jobs will be eliminated.
Macy is expected to dismiss about a third of the 300 administrative employees at its Manhattan corporate headquarters later this week. The combined company will spend about $32 million on severance packages and performance bonuses.
Talk of Another Bid
There was speculation yesterday that another suitor for Macy might arrive on the scene. Dan Dorfman, a columnist for USA Today, wrote that he would not be surprised to see the May Department Stores Company up the ante for Macy with an offer worth between $4.2 billion and $4.3 billion. The Macy -Federated merger is valued at about $4.1 billion, and many people involved in Macy's bankruptcy believe Federated is overpaying.
A spokeswoman for May declined to comment on the report.
Many analysts believe May would be more interested in acquiring the Mercantile Stores Company, a $2.73 billion department store company operating McAlpin's, Gayfers, Maison Blanche and 10 other regional chains in the Midwest and South. Still, May is one of a handful of retail companies that could muster the financing needed to buy Macy.
Mercantile specifically addressed rumors about discussions with May at its annual shareholders meeting three months ago, when it said it was not for sale and not in negotiations about a sale.
But strong rumors that it was in negotiations with May arose again last week when Mercantile's stock jumped about 13 percent on heavy trading volume.
"I think there is a definite possibility that May is looking at Mercantile," Walter F. Loeb, a retail analyst and consultant, said.
Many analysts believe May would be interested in Macy's stores in the Southeast, which Dillard Department Stores Inc. also wants.
Court Decision Favors Federated
Separately, the Federal District Court in Manhattan ruled last week that Federated had the right to deduct breakup fees it paid to the Edward J. DeBartolo Corporation, a large mall development company, and Macy in the 1980's.
In 1986, when a Canadian real estate company, the Campeau Corporation, bid for the Allied Stores Corporation, DeBartolo stepped in with a counteroffer that Allied ultimately turned down in favor of an improved offer from Campeau. Two years later, Federated turned down an acquisition with Macy in favor of a bid from Campeau.
Federated, which represented the combined Federated and Allied, later deducted $177 million in fees it had paid DeBartolo and Macy for breaking the deals it had struck with them.
The Internal Revenue Service challenged that deduction, but the court ruled on Friday that it was proper. Robert Willens, a tax expert at Lehman Brothers, estimated that the ruling saved Federated between $90 million and $100 million in taxes and accrued interest.
