Lord & Taylor Sells For Nearly $1.2B

Federated Department Stores Inc. said Thursday it has agreed to sell its famed Lord & Taylor department store chain to a property development firm for almost $1.2 billion in cash.

Federated said that its board has approved the sale to Purchase, N.Y.-based NRDC Equity Partners LLC, which is a partnership between principals of Apollo Real Estate Advisors L.P. and principals of National Realty & Development Corp. The deal is expected to close in the third quarter, pending regulatory approvals.

The $1.195 billion deal includes 48 Lord & Taylor stores, including the flagship store in Manhattan, as well as a distribution center in Wilkes-Barre, Pa.

NRDC said it plans to run Lord & Taylor as a specialty department store chain and to keep L&T's management team, including CEO Jane Elfers.

"This agreement concludes a successful process to divest Lord & Taylor," said Terry J. Lundgren, Federated's chairman, president and CEO, in a statement. "While Lord & Taylor does not fit with Federated's strategic focus on building the nationwide Macy's and Bloomingdale's brands, it is a well-known niche specialty retailer with a great name, many outstanding locations and an experienced management team."

Richard Baker, president of NRDC Equity Partners, said in separate release that the acquisition of L&T "furthers "NRDC's strategy of acquiring great companies that have a strong brand and a valuable real estate platform."

In February, NRDC acquired Linens 'n Things in partnership with Apollo Management.

"Lord & Taylor has been an iconic national brand for 180 years. We believe there is significant opportunity to continue the revitalization of the brand begun in 2003," Baker said.

Federated, which purchased Lord & Taylor when it acquired May Department Stores Co. last year, announced in January that it was putting L&T on the block because it didn't fit with an expansion strategy for its larger Macy's and Bloomingdale's chains.

Lord & Taylor's performance has slipped in recent years, and fixing it is going to be a big challenge, analysts say. The department store chain, founded in 1826, had established a reputation for offering American classic design but lost its highbrow appeal in the 1990s amid fierce competition when it began to trade down to lower-priced merchandise.

In 2003, Lord & Taylor, under Elfers' leadership, decided to close 32 underperforming stores in 15 states and spearheaded a makeover aimed to bring back its luster. The retailer eliminated moderate-price labels that were overly distributed elsewhere and brought in trendier brands such as Kate Spade. But efforts to bring back the more well-heeled customer have been mixed.

Analysts say the retailer's most valuable asset is its real estate, particularly its 10-story, 600,000-square-foot flagship store on Fifth Avenue.

NRDC said that L&T's real estate portfolio is being reviewed, and no decisions have been made on any individual stores.

Shares of Federated rose 30 cents to $36.10 in afternoon trading on the New York Stock Exchange.

Federated was advised in the L&T divestiture process by Goldman Sachs, JPMorgan and the law firm of Jones Day. NRDC was advised by Tri Artisan Partners LLC, Bear Stearns & Co., Inc. and the law firm of Stroock & Stroock & Lavan LLP.


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