Federated acquires May for £17 billion

Macy's parent Federated Department stores has reached an agreement to merge with May Department stores for US$17 billion (£8.83 billion). May will go for US$11 billion (£5.71 billion) in cash and shares and Federated will assume US$6 billion (£3.11 billion) of Macy's debt. The deal will establish Federated as a national retailer in the US, covering 49 states. Once the deal is complete, the retailer will have an estate that comprises 950 department stores and 700 bridal and formalwear stores.

Federated president, chairman and chief executive Terry Lundgren expected the merger to cut£450 million in costs through the consolidation of central functions by 2007. The merger will cost£1 billion, spread over the next three years.

He said: 'Today we have taken the first step toward combining two of the best department store companies in America, creating a new retail company with truly national scope and presence.'

Mays stores will eventually be converted to the Macy's brand, but the process will not begin until the start of next year.