St. Louis MO, May 27--May Department Stores and its expected acquirer Federated Department Stores released a joint letter Thursday to employees, saying the companies won't lay off any workers or eliminate any jobs related to their planned deal before March.
The St. Louis Post-Dispatch reported that May and Federated expect to become one company later this year in a $17 billion deal, creating a nationwide, dominant department-store chain. The company would have about 950 department stores and $30 billion a year in revenue.
The deal still needs approval from shareholders and regulators. It's expected to close in the third quarter, just in time for the busy holiday shopping season.
Federated, of Cincinnati, and May have formed a transition team of employees from both companies. The team will determine the needs and resources of both companies as well as how Federated will learn more about May, the letter to employees said.
The companies also said that the large majority of stores -- as well as most central and support operations -- will continue beyond March 1, and, in a number of areas, most of those jobs will remain permanent parts of the new operation.
"We want everyone at May to be able to take a deep breath and realize that there is time for Federated to learn more about May, and there is time for May associates to learn more about the potential opportunities it will provide," the chief executives of both companies said in the letter.
"We hope this announcement is reassuring and allows all May associates to focus on the important task of running a successful retail business during 2005."
Still, much of the benefit of the deal is the potential for cost savings through consolidated back offices and buying departments. The deal is expected to give the combined company more clout with vendors and advertising outlets as well.
After the deal was announced in February, Federated Chief Executive Terry Lundgren said May's St. Louis headquarters would become a divisional headquarters, with functions such as regional buying and advertising.
"There are going to be layoffs," Lundgren said at the time. "In fairness, we have to take the time, meet the people, get their point of view. We have a history of treating people well, and we'll do it in this transition."
Federated, which owns the Macy's and Bloomingdale's chains, said then that it expected to realize about $450 million in cost synergies by 2007.
In March, May held meetings with employees to discuss benefits and severance if layoffs occur. When last quarter's earnings disappointed Wall Street, one analyst said concerns about the deal could be hurting productivity.
A May spokeswoman said the purpose of the letter this week was to reaffirm that Federated will learn more about the company and its people before making any decisions. "Change is unsettling," said spokeswoman Sharon Bateman.
Federated recently renamed its regional chains Macy's and said similar changes probably will be made to May's chains, which include Famous-Barr and Lord & Taylor. Those changes won't occur before 2006, Federated has said.
Analysts also have speculated that Federated or May would have to sell or close as many as 100 stores to gain approval from antitrust regulators. The Federal Trade Commission is reviewing the deal and asked for additional information last month.
