Federated in early talks to buy rival May

Federated Department Stores Inc. is in preliminary talks to buy rival May Department Stores Co., according to a report in the Wall Street Journal Thursday.

A combination would create a national retail chain of nearly 1,000 department stores under names ranging from Bloomingdale’s and Macy’s to Marshall Field’s.

The talks are the latest sign of a new round of consolidation in the U.S. retailing sector, especially among mainstream, mid-market mass retailers, Dow Jones Newswires reports. These stores are getting squeezed between discount giants like Wal-Mart Stores Inc. and upscale retailers such as Neiman Marcus Group, Saks Inc.’s Saks Fifth Avenue, and Nordstrom Inc. They are also losing business to fast-growing specialty retailers specializing in areas such as apparel and home furnishings.

The discussions between Federated and May are at a delicate stage after several meetings, and there is no guarantee a deal will be reached, people familiar with the situation reportedly said. The value of a possible deal isn’t clear, the Wall Street Journal reports. May, which is based in St. Louis and operates 501 department stores, has a current market value of about $9.2 billion. Federated, which is based in Cincinnati and has 459 stores, has a slightly larger market value of $9.7 billion. That suggests a stock swap as the most likely path to a transaction.

Federated, the parent of chains such as Bloomingdale’s and Macy’s, and May, which owns Marshall Field’s, Lord & Taylor and Filene’s, held unsuccessful merger talks in 2002.