St. Louis, MO, January 19--May Department Stores Co. stock surged Tuesday amid renewed optimism for the company in the wake of chief executive Gene S. Kahn's abrupt resignation Friday.
The shares rose $4.37, or 16 percent, to close at $32.21 on the New York Stock Exchange.
Kahn's move sparked immediate speculation that May could be a buyout candidate. In addition, investors and analysts appeared equally cheered by the prospect that a strong new CEO could be hired to right the company's flagging fortunes.
"The announcement appears likely to halt the downdrift in May shares, while creating a basis for speculation about possible positive developments," Oppenheimer analyst Bernard Sosnick said in a research note Tuesday.
Late Friday May announced that Kahn had retired. President John L. Dunham will act as chairman and chief executive while the company looks for a successor.
May operates more than 500 department stores, including Lord & Taylor, Foley's, Filene's and Hecht's.
Speculation about a possible buyout of the company focused on its chief rival, Federated Department Stores Inc.
Sosnick pointed out that an acquisition of May would let Federated spread its Macy's chain to Philadelphia, Washington, Pittsburgh, Cleveland, St. Louis and Denver, giving it national coverage.
Sosnick postulated that Federated "could pay a premium for May, and still come away with a strategic coup and an accretive acquisition."
A "moderate" price for May would be $35 a share, or about a 26 percent premium to Friday's close, he said.
Meanwhile, analysts frequently mentioned Vanessa Castagna, a highly regarded former J.C. Penney Co. executive, as a possible replacement for Kahn. Castagna, who headed J.C. Penney's stores, catalog and Internet units, resigned in November after being passed over for that company's top job.
Kahn's departure "presents the May board with a clear-cut opportunity to attract a top-drawer talent," A.G. Edwards analyst Robert F. Buchanan said in a research note. He added that Castagna has "proven abilities in product and marketing."
Neither Buchanan nor Oppenheimer's Sosnick own stakes in May, nor do their firms have investment-banking relationships with the company.
