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Proffitt's in store for Saks
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July 6, 1998: 2:21 p.m. ET
Regional department store chain buys longtime retailer for $2.1B in stock
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NEW YORK (CNNfn) - Regional retailer Proffitt's Inc. said it has agreed to acquire Saks Holdings Inc. for approximately $2.1 billion in stock, creating a combined company with 330 stores in 38 states and 1998 revenues in excess of $6 billion.
Under terms of the agreement, which the companies announced late Sunday, Saks will become a subsidiary of Proffitt's, and Proffitt's will change its name to Saks Inc.
Birmingham, Ala.-based Proffitt's has built itself into the fourth largest department store chain by purchasing smaller retailers, mostly in the South and Midwest. It will retain the No. 4 position after adding Saks' 96 stores to its 234 stores.
Shares of Saks (SKS) gained 1/4 to 29-1/4 in midday trading. Proffitt's (PFT) shares fell 4-1/8, or 10 percent, to 36-9/16.
"This was a once-in-a-lifetime opportunity to acquire the premier global brand in retail in an immediately accretive transaction," said Brad Martin, Proffitt's chairman and chief executive officer. [213K WAV] or [213K AIFF]
Martin said he plans to expand Saks' brand into "new retail opportunities," including electronic commerce. Saks currently does not operate a Web site.
Martin also said he will cross-sell Saks' catalog to Proffitt's 5.2 million credit card holders.
Analysts had been expecting a high-profile, luxury retailer to acquire Saks after its parent company, Bahrain-based investment bank Investcorp International, said last month it was putting Saks up for sale.
"It's surprising because Proffitt's is not an upscale retailer," said Liz Ann Sonders, money manager at Avatar Associates. "The consensus was that it would be another upscale retailer buying Saks. But they're going to maintain Saks in its present form, and they have a fantastic management team at Proffitt's. They can make it work."
The agreement calls for Saks shareholders to receive 0.82 of a share of Proffitt's common stock for each share of Saks common stock. Proffitt's will issue approximately 52.5 million shares to complete the deal.
Martin will retain his titles as chairman and CEO at the combined company, which will be based in Birmingham. Philip Miller will retain his role as chairman and CEO of Saks Fifth Avenue.
The companies said Saks Fifth Avenue's merchandising, store operations, marketing and other support functions will continue to be based in New York.
Proffitt's typically leaves intact the names and management of the retail chains it acquires.
Martin told CNNfn the companies expect minimal job losses as a result of the Monday's merger.
"The bulk of the cost savings will come from … our ability to take the infrastructure Proffitt's has -- for example, our credit department -- and extend it into Saks, which today outsources that function," he said.
"There may be some reductions in the back office, but we'll offer opportunities for those individuals in other positions in the corporation."
The companies expect the transaction to be completed by the early fourth quarter. The combined company will take charges related to the transaction throughout 1998 and 1999.
Saks Holdings operates the landmark Saks Fifth Avenue store in New York, which accounts for roughly 20 percent of the entire company's sales. 
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Proffitt's
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