Happy New Year, Macy's You're Under Attack

Talk about starting off the New Year with a bang. On Jan. 2, Federated Department Stores Inc. made a stunning announcement: It had purchased a large portion of R.H. Macy & Co.'s most secured debt from Prudential Insurance Co. of America and was seeking a merger with the giant department store chain. In a blinding minute, Federated fired the first salvo in what is likely to be a nasty battle for one of the nation's preeminent--albeit bankrupt--retailers.

On Seventh Avenue, there's plenty of speculation about other interested parties, including chains such as Dillard Department Stores Inc. and May Department Stores Co. or shopping-center developers hungry for Macy's prime real estate. Two candidates, says Bill Adamski, senior vice-president in the real estate group at Lazard Fr res & Co., are developers Melvin Simon & Associates and General Growth Properties. General says it's not interested, and Simon and Dillard's couldn't be reached. May wouldn't comment.