EXHIBIT 99.1
[FEDERATED DEPARTMENT STORES, INC. LOGO]
CONTACTS:
MEDIA - CAROL SANGER
513/579-7764
INVESTOR - SUSAN ROBINSON
513/579-7780
FOR IMMEDIATE RELEASE
FEDERATED AND MAY ANNOUNCE MERGER
$17 BILLION TRANSACTION TO CREATE VALUE FOR CUSTOMERS, SHAREHOLDERS
CINCINNATI, NEW YORK AND ST. LOUIS, February 28, 2005 -- Federated
Department Stores, Inc. (NYSE: FD) and The May Department Stores Company (NYSE:
MAY) today announced that they have entered into a merger agreement.
Pursuant to the transaction, each share of May will be converted into the
right to receive $17.75 per share of cash and 0.3115 shares of Federated stock.
Based on the 10-day trading average of Federated stock as of Friday, February
25, 2005, this equates to a value per share of $35.50, or $11 billion in total
equity value. In addition, Federated will assume May debt that was approximately
$6 billion at year-end, for a total consideration of approximately $17 billion.
As part of this transaction, Federated has committed to increase its
annual dividend to $1 per share.
The deal, which was approved by the boards of directors of both companies
yesterday, will establish Federated as a $30 billion national retailer whose
economies of scale and scope of operations - stores in 49 states, Guam, Puerto
Rico and the District of Columbia - will enable it to compete more effectively
in the highly competitive retail sector.
"This is truly an exciting day in American retailing," said Terry J.
Lundgren, Federated's chairman, president and chief executive officer. "Today,
we have taken the first step toward combining two of the best department store
companies in America, creating a new retail company with truly national scope
and presence."
Completion of the deal is contingent on regulatory review and approval by
the shareholders of both companies, a process that is expected to take several
months. The transaction is expected to close in the third quarter of 2005.
Synergies Created
Once consummated, Federated will operate more than 950 department stores,
along with approximately 700 bridal and formalwear stores. In addition, 15 new
states, mostly in the nation's heartland, will be layered onto Federated's
existing 34-state operating base, with relatively little overlap
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between the companies' locations. As a result, Federated for the first time will
have a truly national retail footprint, with stores in 64 of the nation's top 65
markets.
Lundgren said that this transaction is expected to be accretive to
Federated's earnings per share in 2007. Federated expects to realize
approximately $450 million in cost synergies by 2007, resulting from the
consolidation of central functions, division integrations and the adoption of
best practices across the combined company. In addition, the company anticipates
approximately $1 billion in one-time costs related to the acquisition and
integration, spread out over a three-year period beginning in 2005.
"In today's retail environment, competition comes from every conceivable
retail format. To succeed, we have to operate more efficiently and compete more
effectively against players at all levels of the retail demographic," said John
Dunham, May's president and acting chairman and chief executive officer. "There
is no question that this is a bold and exciting move, and one I believe will
have a positive impact on competitive retailing for American consumers in the
longer term."
Federated said that while it intends to merge May's St. Louis corporate
headquarters functions into its own Cincinnati and New York corporate offices,
beginning this year, its intention is to make St. Louis the headquarters of one
of the major operating divisions going forward in order to take advantage of the
considerable talent pool that exists there. Federated also said it intends to
honor May's extensive philanthropic commitments to the communities in which it
operates, and to continue that practice.
Brand Conversions
While no division consolidations or store name changes are planned before
2006, Federated said it is likely that most of May's regional department stores
ultimately will be converted to Macy's.
"We have had considerable success in re-branding our own regional stores
as Macy's, so obviously we anticipate continuing this strategy to some extent
with our new stores," Lundgren said. "Operating regional stores primarily under
one brand means we can advertise nationally, unlike regional retailers, which is
more cost-effective. It also means that cause-marketing programs such as Macy's
`Go Red for Women' campaign, which benefits the American Heart Association, can
be promoted nationally, making them more impactful for the causes they benefit."
Strong Benefits
Among the benefits to customers arising from the acquisition, Lundgren
cited the capacity to lower costs through synergies; the ability to engage in
national marketing initiatives; the potential to expand the private brand
merchandise lines of both companies; a rollout of Federated's successful
reinvent initiatives to May's department stores; and the ability to expand
customer loyalty programs and offer bridal and gift registries to a national
customer base.
"For the customers of both companies, joining together means we will be
better able to offer value and an improved retail experience, from better
assortments and merchandise selections to more competitive pricing and service,"
Lundgren said. "For shareholders and employees, joining together means we will
be better able to meet competitive challenges in the retail marketplace and
better able to realize growth opportunities over the longer term. And for the
communities we serve, joining these companies together means additional
opportunities for cause-marketing promotions and expanded involvement in
initiatives that facilitate our giving back in a meaningful way to the places
our customers and employees live and work."
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Lundgren said the combination of these two companies is expected to lead
to accelerated same-store sales growth. "We expect the sales of the combined
company to grow faster as a result of certain changes we would make, including
introducing the best of Federated's and May's private brands into each other's
stores and rolling out our reinvent initiatives to May stores."
"It will take us until mid-2007 to implement all of the changes we would
anticipate as a result of this acquisition, and we intend to take the time
necessary to do it right," Lundgren said. "Our first priority is to continue to
execute in all of our stores this year, while we focus behind the scenes on
consolidating corporate and support operations."
Federated was advised by and received a fairness opinion from Goldman,
Sachs & Co. In addition, Federated also received financial advice on certain
matters pertaining to the merger from Credit Suisse First Boston LLC. Jones, Day
provided legal advice to Federated.
May was advised by Morgan Stanley Dean Witter, Inc. and received a
fairness opinion from Peter J. Solomon Company, Limited. Skadden Arps provided
legal advice to May.
Stockholders are urged to read the joint proxy statement/prospectus
regarding the proposed transaction when it becomes available, because it will
contain important information. Stockholders will be able to obtain a free copy
of the joint proxy statement/prospectus, as well as other filings containing
information about Federated and May, without charge, at the SEC's Internet site
(http://www.sec.gov). Copies of the joint proxy statement/prospectus and the
filings with the SEC that will be incorporated by reference in the joint proxy
statement/prospectus can also be obtained, without charge, by directing a
request to Federated, 7 West Seventh Street, Cincinnati, Ohio 45202, Attention:
Office of the Secretary, or to May, 611 Olive Street, St. Louis, Missouri,
63101, Attention: Office of the Secretary.
The respective directors and executive officers of Federated and May and
other persons may be deemed to be participants in the solicitation of proxies in
respect of the proposed transaction. Information regarding Federated's directors
and executive officers is available in its proxy statement filed with the SEC by
Federated on April 15, 2004, and information regarding May's directors and
executive officers is available in its proxy statement filed with the SEC by May
on April 22, 2004. Other information regarding the participants in the proxy
solicitation and a description of their direct and indirect interests, by
security holdings or otherwise, will be contained the joint proxy
statement/prospectus and other relevant materials to be filed with the SEC when
they become available.
This press release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Such statements
include, but are not limited to, statements about the benefits of the business
combination transaction involving Federated and May, including future financial
and operating results, the new company's plans, objectives, expectations and
intentions and other statements that are not historical facts. Such statements
are based upon the current beliefs and expectations of Federated's and May's
management and are subject to significant risks and uncertainties. Actual
results may differ materially from those set forth in the forward-looking
statements because of a variety of factors, including: the ability to obtain
governmental approvals of the transaction on the proposed terms and schedule;
the failure of Federated and May stockholders to approve the transaction; the
risk that the businesses will not be integrated successfully; the risk that the
cost savings and any other synergies from the transaction may not be fully
realized or may take longer to realize than expected; disruption from the
transaction making it more difficult to maintain relationships with customers,
employees or suppliers; transaction costs associated with the renovation,
conversion and
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stores, manufacturers' outlets, off-price and discount stores, and all other
retail channels; and general consumer-spending levels, including the impact of
the availability and level of consumer debt, and the effects of weather.
Additional factors that could cause Federated's and May's results to differ
materially from those described in the forward-looking statements can be found
in the 2003 Annual Reports on Forms 10-K of Federated and May filed with the SEC
and available at the SEC's Internet site (http://www.sec.gov).
About Federated: 111,000 employees in 34 states. Founded 1929,
headquartered in Cincinnati, OH, with corporate offices in Cincinnati and New
York. Federated currently operates more than 450 stores in 34 states, Guam and
Puerto Rico under the names of Macy's, Bloomingdale's, Bon-Macy's,
Burdines-Macy's, Goldsmith's-Macy's, Lazarus-Macy's and Rich's-Macy's. The
company also operates macys.com and Bloomingdale's By Mail. Federated is
converting all regional department stores to Macy's brand effective March 6,
2005. Annual sales: $15.6 billion.
About May: 132,000 employees in 46 states. Founded 1910, headquartered in
St. Louis, MO. At the end of the fiscal 2004, May operated 491 department stores
under the names of Famous-Barr, Filene's, Foley's, Hecht's, Kaufmann's, Lord &
Taylor, L.S. Ayres, Marshall Field's, Meier & Frank, Robinsons-May,
Strawbridge's, and The Jones Store, as well as 239 David's Bridal stores, 449
After Hours Formalwear stores, and 11 Priscilla of Boston stores. May currently
operates in 46 states, the District of Columbia, and Puerto Rico. Annual sales:
$14.4 billion.
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EDITOR'S NOTES:
- THERE WILL BE A LIVE WEBCAST OF A CALL WITH INVESTORS AND ANALYSTS
BEGINNING AT 10 A.M. ET TODAY. THIS CALL CAN BE ACCESSED THROUGH THE
FEDERATED WEBSITE, OR BY DIALING IN AT 1-800-659-4363 TO LISTEN TO
THE BROADCAST IN REAL TIME. PRE-REGISTRATION IS REQUESTED. THE
WEBCAST WILL BE ARCHIVED FOR REPLAY BEGINNING APPROXIMATELY TWO
HOURS AFTER THE CONCLUSION OF THE LIVE CALL.
- IN ADDITION, A PRESS CONFERENCE TO DISCUSS TODAY'S ANNOUNCEMENT WILL
BE HELD BEGINNING AT 11 A.M. AT THE RIHGA ROYAL HOTEL, 151 WEST 54TH
STREET, NEW YORK CITY. EXCERPTS FROM THAT PRESS CONFERENCE WILL BE
TAPED AND MADE AVAILABLE VIA SATELLITE UPLINK LATER THIS AFTERNOON.
A MEDIA ADVISORY WITH INSTRUCTIONS FOR ACCESSING THAT SATELLITE FEED
WILL BE ISSUED VIA BUSINESS WIRE LATER TODAY AS WELL.
- ADDITIONAL INFORMATION ON FEDERATED IS AVAILABLE ON THE INTERNET AT
WWW.FDS.COM/PRESSROOM AND ADDITIONAL INFORMATION ON MAY IS AVAILABLE
AT WWW.MAYCO.COM.