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Wednesday, July 18, 2007

How much closer to the return of Marshall Field's...

Last month I wrote about the possibility of Macy's Inc being sold to a private equity firm and that the flagship store on State Street returned to its Marshall Field's origins. Today in Crain's, there's more about Macy's...
Shares of Macy's Inc. were up about 9% Wednesday afternoon after an unconfirmed report that private-equity firm Kohlberg Kravis Roberts & Co. was considering a bid for the department store chain.
The online edition of Women's Wear Daily magazine, citing sources, said KKR, which has filed for an initial public offering, was partnering with Goldman Sachs Group on an offer valued at $52 a share, or about $24 billion, which may or may not exclude Macy's debt.

The publication quoted private-equity sources as saying an agreement in principle could be ready within days and that parties may be aiming to get details ironed out before Monday, the scheduled date for a series of investor meetings planned by Macy's management.

Macy's spokesman Jim Sluzewski said the company does not comment on rumor or speculation.

Macy's shares were up $3.65 to $43.68 this afternoon on the New York Stock Exchange after hitting $45.50. So far this year, the shares are up about 12%.

Persistent talk of a possible takeover has lifted the stock about 10% since late June. Macy's, formerly known as Federated Department Stores, posted a string of disappointing sales at stores open at least a full fiscal year.

Sales at former May stores converted to Macy's have trailed expectations, and last week Macy's pared its profit forecast for the second quarter.

What's more, Macy's replaced its marketing chief in late May and faces lawsuits that charge it concealed that the integration of May Department Stores, acquired in 2005, was not going well.

"I think private equity smells a big opportunity here," said Brian Sozzi, a retail sector analyst with Wall Street Strategies.

Sozzi said he thinks a private-equity firm would make changes that Macy's likely would not be able to execute as a public company, including selling off some of the former May stores that have underperformed.

"A lot of consumers in these former May markets are backlashing against Macy's," Sozzi said. "They are used to a more lower-priced product offering and they haven't taken to the more upscale Macy's approach."

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