Canadian Bids $4.2 Billion for Federated Dept. Stores : Bullock’s, Magnin in the Chain

Federated Department Stores, parent company of Bullock’s and I. Magnin department stores and Ralphs supermarkets, today became the target of an unsolicited, $4.2-billion takeover offer by Canadian real-estate developer Campeau Corp.

Campeau, which over the last year has sold off many of the assets of a retailer it bought in 1986, made a $47-a-share offer for Federated.

With its bid, Campeau is targeting one of the nation’s premier retailers. Perhaps Federated’s most notable franchise is Bloomingdale’s. In addition to Bullock’s and I. Magnin in California, it also owns such well-known regional chains as Burdines in Florida, Foley’s in Texas, Rich’s in Atlanta and Goldsmith’s in Memphis.

Observers indicated that Campeau’s $47-a-share bid appeared to be a low-ball offer for a company that would have a breakup value of as much as $60 to $65 a share. That would put the total value of the company at between $5.5 billion and $6 billion.

As of 2 p.m. in New York, Federated shares had risen $13 to $48.875, above the offering price, an indication that Wall Street perhaps expected a bidding war.

Candidate for Takeover

Federated has for several years been believed to be a likely candidate for takeover because of its undervalued real estate.

Thomas H. Tashjian, a vice president with the Los Angeles investment firm of Seidler Amdec Securities, said Federated management would likely try to put together its own leveraged buyout of the company rather than accede to a takeover.

“Management worked to enhance shareholder value,” he said. “They believe that the company is best operated under their . . . direction.”

Another analyst who asked to remain anonymous said the company would find eager purchasers lined up “around the block” should it put any of its best-known franchises up for sale to raise funds for a buyout.

Among the likeliest to be sold, most observers agreed, would be Ralphs, a Compton-based supermarket company with 127 stores in Southern California. Of Federated’s units, that chain is the most distant from Federated’s core department store business.

Indeed, in a document filed with the Securities and Exchange Commission this morning, Campeau indicated that it is considering the possibility of selling four Federated properties. They would include Ralphs and Gold Circle, a discount operation; MainStreet, an apparel chain, and Children’s Place, which sells children’s apparel.

Federated Responds

In a brief statement issued from its Cincinnati headquarters, Federated said that it is conferring with advisers and that its board of directors “will consider the offer in due course.” It added that the board will communicate with shareholders no later than Feb. 5 and advised shareholders not to tender their shares in the meantime.

Analysts and other retail observers were surprised by Campeau’s interest but noted that Manhattan real-estate developer Donald Trump had earlier sized up Federated as an undervalued company.

Some observers viewed the move by Campeau as audacious, given its previous experience as an acquirer of a large retail company, Allied Stores. Soon after its $3.6-billion purchase of Allied was completed in late 1986 after a bitter, protracted battle, Campeau set about selling off 15 of the company’s 21 divisions to raise funds. Campeau received $1.2 billion from the sale of such stores as Bonwit Teller but retained several other prestigious franchises, including Brooks Bros. and Ann Taylor.

Robert Campeau is one of Canada’s most powerful French-speaking businessmen. His firm develops, owns and manages commercial real estate in North America.