Apollo to acquire Lord & Taylor for $1.2bn

Federated Department Stores will sell the chain to NRDC Equity Partners, a partnership between Apollo and National Realty & Development Corp.

Cincinnati-based Federated Department Stores, the second-largest US department store operator, has agreed to sell the Lord & Taylor department store chain to NRDC Equity Partners for $1.2 billion in cash. NRDC is a partnership between principals of Apollo Real Estate Advisors and National Realty & Development Corp.

The 180-year-old New York department store chain had sales of $1.57 billion in 2004. Federated, which also owns Bloomingdale’s, Macy’s and Filene’s, acquired Lord & Taylor when it bought May Department Stores last year for $11 billion. The firm is divesting because it is looking to concentrate on the Macy’s brand, converting about 400 May properties into Macy’s stores. Federated is also trying to sell more than 760 bridal and footwear stores.

In an interview with the New York Time, NRDC president Richard Baker said the firm plans to continue operating the chain’s 50 stores, including the one on 5th Avenue. With its flagship store on the corner of 39th Street and Fifth Avenue worth an estimated $300 million to $400 million, there had been speculation that the store might be closed and resold. Baker did say that the firm will likely be reducing the size of the main location, which is about triple the size of an average Lord & Taylor store.

As the retail industry undergoes consolidation, private equity firms have become increasingly active in the sector. In October, Texas Pacific Group and Warburg Pincus acquired Neiman Marcus, financing the $5.1 billion deal with a 35 percent equity stake. In December, Apax Partners took Tommy Hilfiger private for $1.6 billion. For its part, NRDC acquired Linens & Things in February, and it has bid for Toys R Us, the Pathmark grocery store chain and Burlington Coat Factory.