The May Department Stores Co. (St. Louis) has entered into a definitive agreement to acquire the 62-store Marshall Field’s department store group from Target Corp. (Minneapolis) for a total consideration of $3.24 billion in cash, subject to adjustments.
May also bought the sites of nine Mervyn’s stores in the Minneapolis-St. Paul area.
The transaction is expected to be completed in May’s fiscal 2004 second or third quarter.
Marshall Field’s reported revenues of $2.58 billion and generated $107 million in segment earnings in fiscal 2003, both down from the previous year. Its locations — primarily in the Chicago, Minneapolis and Detroit metropolitan areas — include its world-famous flagship store on State Street in the Chicago Loop and important flagship stores in Detroit, Minneapolis and suburban Chicago.
With the addition of Marshall Field’s, May will operate 500 department stores in 39 states. Under the terms of the agreement, May will acquire all the assets that comprise Marshall Field’s, including stores, inventory, customer receivables, and distribution centers.
“We are delighted to welcome this venerable and nationally recognized, premier department store company as a division of May and to welcome the Marshall Field’s associates to our company,” said May chairman and ceo Gene Kahn. “This unique opportunity to add to our department store portfolio will . . . allow us to combine the best of Marshall Field’s and May to further expand and enhance the products and services we can provide to our customers. Among the benefits we see is that this combination will produce excellent economies of scale, improved buying power and an expanded distribution network.”
“Our decision to sell Marshall Field’s, though not easy, reflects our long-term commitment to create substantial value for our shareholders over time, combined with our responsibility to our team members, our guests and the communities we serve,” said Target chairman and ceo Bob Ulrich. “We believe that the sale of Marshall Field’s to The May Department Store Co. as an ongoing business enhances the opportunity for all of our stakeholders to enjoy continued success for many years.”
The Field’s department store division is actually the amalgam of the three department store chains Target accumulated in the last 33 years beginning in 1971 when, as the Dayton Corp., it bought the Detroit-based J.L. Hudson’s department store chain. The company, then known as Dayton Hudson Corp., bought Chicago-based Marshall Field’s in 1990. In 2000, the company changed its corporate name to Target Corp., after the overwhelmingly successful discount mass-merchandising operation it had started in 1962. At the time, its entire department store division was renamed Marshall Field’s and all its individual stores were renamed, as well. But the department store operation never matched the success of the Target Stores, and has been the center of sell-off rumors for several years.
But as sales dipped for the nation’s department stores, the time never seemed right. And last year, Target invested more than $200 million in renovating the Field’s Chicago flagship. With the revival of the department store business this year — caused by both reconstruction and new merchandise — the time to sell began to seem better. While rumors flurried as to who would obtain the historic chain, May Co. presumably outbid the other likely buyer, Federated Department Stores (Cincinnati). “May obviously felt it needed Field’s more than Federated did,” one retail analyst told The New York Times.
Last month, May reported an 0.3 percent increase in same-store sales. But the retailer said it expects the synergies from the new acquisition to add $85 million in pretax earnings for fiscal 2005, $140 million in 2006 and $180 million in 2007.
May said it plans to convert most of the nine Mervyn’s locations into Marshall Field’s branch stores; the rest may be sold to developers.