Dillard’s Inc., one of the largest U.S. department store chains, said Monday it will buy Mercantile Stores Co. for $2.94 billion, or $80 a share in cash, to cement its hold on the South and Midwest.
Fairfield, Ohio-based Mercantile operates 103 department stores such as Gayfers, Maison Blanche and McAlpin’s, while Dillard’s has 272 stores.
The Milliken family, which owns 40 percent of Mercantile’s stock, will support the transaction, meaning Dillard’s rivals will have a hard time dislodging its bid for one of the last major independent chains, analysts said.
The purchase is the biggest yet for Chairman William Dillard, who has focused on expanding through opening stores and small acquisitions most of the last decade. Both chains target mid- to upper-income customers in many of the same medium-size markets, which will help the Little Rock-based retailer cut costs by consolidating advertising and distribution.
“They needed more critical mass,” said money manager Thomas Buynack of Society Asset Management, which owns retail shares. “They’ve been slow as the industry has consolidated.”
