Retail merger effects unclear

Andrew Edwards

South Coast Plaza and Fashion Island representatives said Monday that

it was too early to judge the multi-billion-dollar merger between two

department store companies that own stores in each center, though

executives at one of the firms alluded to possible store closures.

Cincinnati-based Federated Department Stores Inc., the country’s

largest department store company, announced Monday that it had agreed

to purchase May Department Stores Co. for $11 billion in cash and

stock. As part of the deal, Federated also agreed to assume

$6-billion of St. Louis-based May’s debt.

Federated owns Bloomingdale’s, which has a store at Fashion

Island, and Macy’s, which has stores at South Coast Plaza. Both

shopping centers are home to May-owned Robinsons-May department

stores.

In a conference call Monday, Federated chief financial officer

Karen Hoguet said her company would not begin a two-year process of

changing stores’ names until next year.

Hoguet said there were few cases of geographic overlap, though

Newport-Mesa, not mentioned specifically by Hoguet, would be an

exception with two Robinsons-May stores competing with Federated

retailers.

Federated may sell stores in areas where the chains overlap,

Hoguet said.

“While it is too early to be specific, we are obviously looking at

store overlap for potential disposition, and we would expect there to

be some disposition,” she said.

South Coast Plaza spokeswoman Debra Gunn Downing said she could

not comment on the merger’s potential effects on the center because

the companies have not made any announcements specific to Costa Mesa.

Similarly, Bill Rams a spokesman for Fashion Island-owner the Irvine

Co., said it was too early to predict the deal’s impact on the

Newport Beach center.

In a statement, Federated chief executive officer Terry Lundgren

said his company would likely recast Robinsons-May stores into Macy’s

stores.

Under that scenario, closures of Robinsons-May stores would be

more likely, UC Irvine marketing professor Mary Gilly said.

“South Coast Plaza has both, so there would be no need to have

them there,” Gilly said.

The merger must be approved by the federal government and both

companies’ shareholders. Federated officials said they expect the

deal to become final in the third quarter of 2005.

* ANDREW EDWARDS

covers business and the environment. He can be reached at (714)

966-4624 or by e-mail at andrew.edwards @latimes.com.