NEW YORK (CNNMoney.com) - Federated Department Stores officially announced Wednesday it signed an agreement to sell its Lord & Taylor division to NRDC Equity Partners for $1.19 billion dollars.

As part of the deal, NRDC, a partnership of Apollo Real Estate Advisors and National Realty & Development Corp., would acquire 48 Lord & Taylor stores located in 9 states including New York, New Jersey, Michigan as well as the District of Columbia. NRDC would also get a distribution center in Pennsylvania.

"This agreement concludes a successful process to divest Lord & Taylor," Terry J. Lundgren, Federated's chairman, president and chief executive officer said in a prepared statement.

"While Lord & Taylor does not fit with Federated's strategic focus on building the nationwide Macy's and Bloomingdale's brands, it is a well-known niche specialty retailer with a great name, many outstanding locations and an experienced management team."

Citing a source close to the matter, the Wall Street Journal reported Thursday that Lord & Taylor is expected to continue to be run as a retail concern, and that Chief Executive Jane Elfers is expected to remain at the helm.

Federated, which acquired Lord & Taylor when it purchase May Department Stores last year, said it expects to finalize the deal in the third quarter of 2006.

Federated (up $0.27 to $36.07, Charts) shares edged higher in afternoon trade on the New York Stock Exchange.

--from staff and wire reports

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