BY LISA BIANK FASIG
The Cincinnati Enquirer
Arkansas-based retailer Dillard's Inc. Monday said it agreed to acquire Mercantile Stores Co. Inc of Fairfield in a $2.9 billion deal that will shake up the department store landscape of the Tristate as well as the nation.
Dillard's, which operates 272 stores in 27 states, including Ohio, will pay $80 a share in cash for Mercantile in a deal expected to be completed in midsummer. The purchase will expand Dillard's, the nation's third-largest department store company, to a transcontinental operation of about 350 stores and $10 billion in annual sales.
The acquisition will eliminate from the Cincinnati area's shopping scene the venerable McAlpin's name. All of the 84-year-old Mercantile's 103 department stores will be transformed into Dillard's stores beginning the second half of this year, analysts say.
Undetermined, however, is the future of Mercantile's corporate offices in Fairfield. Dillard's executives in Little Rock, Ark., did not return phone calls Monday, but Cincinnati City Manager John Shirey released a statement saying most of the headquarters' roughly 1,000 jobs apparently will be eliminated.
Downtown Cincinnati's future also will be touched by the acquisition. The deal essentially scraps Mercantile's plans to open a Maison Blanche store at Fifth and Race, Mr. Shirey said. The city will try to persuade Dillard's to open a store downtown, but analysts said the retailer is known to eschew city centers and build in the suburbs.
Shoppers are likely to see fewer major sales, but merchandise will remain pitched to middle and upper-middle income buyers.
The retailer's 1,500 area department-store employees are not expected to be affected because Dillard's would need them to run the Cincinnati region's seven department stores. It is unclear, though, what will become of the Signatures home store in Harper's Station.
As deals go, it was swift and deliberate, much the way that William Dillard built the chain he founded in 1938.
The McAlpin's at Western Hills Plaza is the only department store on the city's west side.
(File photo)
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"The major shareholders made a decision earlier in the year to divest" their stake in the company, Randy Burnette, senior vice president of real estate at Mercantile stores, said.
Industry experts smiled on the deal, stressing the retailers' compatibilities. Both rank No. 1 or No. 2 in the medium-sized markets where they operate. Mercantile is No. 1 in 70 percent of its markets.
"It's an excellent fit," said Kurt Barnard, the retail expert who authors Barnard's Retail Trends Report. "Mercantile has excellent store locations and that is really what Dillard's is looking for."
And analysts said the retailers' locations fit well together -- 60 of Mercantile's 103 department stores operate in markets free of Dillard's. It is in these overlapping areas where 20 to 30 stores will be sold, and where the first name conversions are likely to occur, Bernard Sosnick, an analyst with Genesis Merchant Group Securities, said.
Some think Mercantile's 16 furniture and home-furnishings stores also might not make the cut, because Dillard's does not operate such outlets.
As for the Cincinnati headquarters, Analyst Jeff Stinson of Midwest Research Maxus Group said it likely will be dismantled or reduced to a regional buying office. Dillard's nearest regional office is in St. Louis, which may be too far for its newly expanded Ohio and Kentucky operations.
