Department of Law: The State Capitol, Albany, NY

Attorney General Eliot Spitzer today announced a settlement with Federated Department Stores, Inc., requiring the divestiture of three department store properties in New York State. The stores to be divested are located in Albany and on Long Island. The divestitures are the result of an investigation by New York and other states that began early this year after Federated, the nation’s largest department store chain, announced its agreement to purchase its longtime rival, May, the second largest department store chain.

Federated operates both the Macy’s and Bloomingdale’s chains, among many others. May stores include Lord & Taylor, Filene’s and Marshall Fields. After the merger, the combined entity, which will be known as Federated will control over 850 department stores nationwide. The transaction closed today, before trading began on the New York Stock Exchange.

Under the terms of the settlement entered into by Federated and the New York State Attorney General and the Attorneys General of the States of California, Massachusetts, Maryland and Pennsylvania, post-transaction Federated must divest 26 identified stores in the five states that signed the agreement. The settlement requires Federated to give priority for the purchase of these stores to any competing department store chain that submits a qualified offer for the locations, or to any mall owner/developer that is ready to lease or sell the location to a competing department store.

Federated must secure all offers for the locations to be divested by February 1, 2006 and must notify the winning offerors by no later than March 1, 2006. The Attorneys General have the right to monitor the sale of the divested locations closely.