CBS chief makes offer to buy Macy Tisch would pay $1 billion for retailer

January 24, 1992|By Stephanie Strom | Stephanie Strom,New York Times News Service

In an apparent solution to R.H. Macy & Co.'s overwhelming financial troubles, Laurence A. Tisch, chairman and chief executive of Loews and CBS, has offered to buy the tottering retail company.

Already a major investor in Macy, Mr. Tisch would spend roughly $1 billion more to substantially increase his stake, people involved in talks to solve Macy's immense debt problems said last night. They added that negotiations were continuing and that details of the proposal could change.

Mr. Tisch is expected to wind up owning perhaps as much as 90 percent of the company's stock and to invest large sums to buy "junk" bonds and stock from creditors and investors at well below face value.

It is not clear whether the management investors, including Edward S. Finkelstein, Macy's chairman and chief executive, would lose their stake.

Macy's board is expected to approve the proposal in the next few days, people familiar with the talks said.

If that happens, Mr. Tisch's move would be expected to calm the maelstrom of speculation about the company's solvency that has engulfed it in recent years. Mr. Finkelstein and his top executives bought Macy from its shareholders for $3.7 billion in 1986.

By eliminating a substantial portion of Macy's debt, the 11th-hour rescue would relieve the company's worries about its bills and interest payments and allow it to concentrate on operating its department stores.

That firmer financial footing also would give Macy's normal sales operations more of a chance to carry the New York-based company through the recession that has claimed many of its once-formidable rivals.

Whether Mr. Finkelstein would remain in charge of the company that operates the Macy's, I. Magnin and Bullock's department store chains and several small specialty stores across the country, is unclear. However, Mr. Tisch and Mr. Finkelstein are close friends.

It is also unclear whether Mr. Tisch, through his L.T. Holding Corp., intends to try to sell any of Macy's assets, such as one of the department store chains.

Macy's operates four stores in the Baltimore area -- at the White Marsh, Hunt Valley, Owings Mills and Marley Station malls. The company also has an I. Magnin store at White Flint Mall in Kensington.

A Macy spokesman declined to comment last night about the company's financial plans. Calls to Mr. Tisch's office and to other Macy board members were not returned.

Mr. Tisch has gained a reputation over the years as a shrewd investor willing to make big bets on companies and assets that others have given up on. Sometimes, as with the purchase of control of the CNA Financial Corp. in 1974, the gamble has paid off handsomely.

Mr. Tisch, 69, and his brother, Preston Robert Tisch, built their fortune through hotels and then Loews Theatres, which they have since sold.

"Bob" Tisch, a former U.S. postmaster general, had expressed interest in bringing a professional football team to Baltimore but pulled himself out of the expansion picture last year when he purchased 50 percent of the New York Giants.

The Loews Corp., which the two brothers control, has a 23 percent stake in CBS Inc., of which Laurence Tisch is chairman and chief executive, but that is far from its only holding.

Mr. Tisch apparently intends to carry out his plans for Macy with the help of a "prepackaged" bankruptcy, a tool that has gained favor in recent years as an expedient way to revive debt-laden companies.

Such a bankruptcy differs from a normal Chapter 11 filing in that it is largely a formality. By the time a prepackaged bankruptcy is filed in court, a debtor and its creditors have already decided what each will settle for. But they still need to go through an expedited bankruptcy process to break the contract terms of their previous debt agreements.

Holders of Macy junk bonds would be offered prices well below face value but above the low market prices to which they have fallen as concern has grown about Macy's prospects.

On Jan. 15, Macy told its suppliers it would delay their payments for two weeks to avoid defaulting on its newly renegotiated bank agreements. Those agreements had been reached in early December, and the inability of Macy to meet a payment deadline so soon thereafter was seen as evidence that the Christmas season had been far worse than Macy had expected.

Other Macy shareholders are expected to agree to sell their stock to Mr. Tisch for a fraction of what they paid, fearing that the only alternative would be a bankruptcy filing that could result in even greater losses.

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