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Wednesday, June 20, 2001



[THE PASSING OF LIBERTY HOUSE]




KEN IGE / KIGE@STARBULLETIN.COM
Darell Puu and son Brice, 10, of Hawaii Kai, were among
the shoppers at Liberty House Ala Moana yesterday, the
day the longtime kamaaina retailer announced it has
been sold to the Macy's store chain.



Macy's deal rocks isle retail

Many employees will be offered jobs either here or at Federated's mainland stores

Changes excite shoppers
Brand not long mourned


By Tim Ruel
truel@starbulletin.com

Some 400 top-level positions at Liberty House remain in limbo as the local company is absorbed by San Francisco-based Macy's West retail chain, but many of the employees are expected to find jobs with Macy's either here or on the mainland.

"It's important to recognize that many senior management, administrative and back-office jobs are already performed at our headquarters, so those positions are most likely to be affected," said Jerry Sullivan, chairman of Macy's West. "Ultimately, there are going to be some layoffs."

Liberty House has 3,000 employees. During the next three months, Macy's will interview all of the top-level and back-office employees. Those who are not rehired could have a shot at mainland jobs with Macy's West, which has 117 stores in Arizona, California, Minnesota, Nevada, New Mexico and Texas.

Macy's West has 28,100 employees, and the company has kept positions open on the mainland while pursuing the purchase of Liberty House during the past few months.

Liberty House employees could also have a chance to work for Macy's sister department stores on the mainland, including Bloomingdale's, Burdines, Bon Marche, Lazarus and Macy's East.


STAR-BULLETIN FILE
On April 6, 1966, Edmund A. Attebury, left, general
manager of Liberty House stores, and Harold C.
Eichelberger, right, untied a maile lei at the
official opening of the Ala Moana store.



One employee who is definitely stepping down is John Monahan, the president of Liberty House, who joined the retailer in 1990 from the May Co. department store chain in Los Angeles.

"You know, this is a real bittersweet time," Monahan said at a press conference yesterday at the flagship Liberty House store at Ala Moana Center, "bitter because of reaching the end of my association with this great store and with the great people at Liberty House.

"However, today is sweet also because it puts an end to all the uncertainty and speculation about Liberty House."

He declined to say what his next move would be but hinted that he would remain in the retail business.

Sullivan, chairman of Macy's West, confirmed yesterday the company had looked at purchasing Liberty House in 1997 but did not move forward because of Hawaii's slumping economy. At the time, the retailer was owned by JMB Realty Corp. of Chicago, which bought out Liberty House's parent company, Amfac Inc., in 1988.

Several months after the talks with Federated fell apart, Liberty House filed Chapter 11 reorganization bankruptcy in March 1998, listing debts of $248.4 million and assets of $284.2 million. The move, which allows companies to reorganize without the threat of lawsuits, happened shortly after Liberty House's lenders sued to replace its board of directors.

During the past three years, competing boards of directors fought over control of the company, driving up the cost of the bankruptcy case to a record $16 million, far overshadowing the $5.4 million bankruptcy of Hawaiian Airlines in 1994.

The Chicago-based owner of Ala Moana Center offered in September 2000 to buy Liberty House out of bankruptcy for $195 million. The company, General Growth Properties Inc., dropped the bid after a U.S. bankruptcy judge said he would reject it. General Growth later followed up with a second bid for Liberty House, which the judge also blocked.

Liberty House emerged from bankruptcy in March of this year, largely owned by two venture capital companies, Oaktree Capital Management of Los Angeles and DDJ Capital Management of Wellesley, Mass. The companies had bought up the bulk of Liberty House's devalued debt during the bankruptcy and were not expected to keep the retailer for long.

Meanwhile, in the past several years, Liberty House has cut its number of stores in half, to 20 outlets from more than 40, mainly by eliminating resort and specialty shops.

Macy's parent company, Federated Department Stores Inc., is buying all the remaining Liberty House department stores, 11 in Hawaii and one in Guam. The 432-store Cincinnati-based chain is also buying seven of the eight remaining Liberty House resort and specialty shops. One specialty shop, at the Marketplace on Kauai, will be folded into another nearby shop.

The purchase price for Liberty House was not immediately disclosed but will become public information in the next few weeks, since Federated is a publicly traded company.

In a news release, the company said that excluding one-time costs of about $50 million to $60 million, the purchase is not expected to affect Federated's per-share earnings during the next 18 months, and will add to earnings afterward.

Last year, Liberty House reported net income of $8.9 million, up from $8.7 million in 1999.

Macy's West was able to get a better deal than four years ago, which helped to push the purchase through, said Sullivan, chairman of Macy's West. The acquisition was also prompted by improvement in Hawaii's economy, said Sullivan, who ran Liberty House's former operations in California from 1973 to 1979.

The sale of Liberty House is expected to be completed as soon as July 9. Macy's West hopes to convert all the Liberty House stores to the Macy's name by the Christmas shopping season but is not making any promises, Sullivan said.

Shares of Federated, traded on the New York Stock Exchange, fell 30 cents yesterday to close at $41.65 a share. The purchase of Liberty House was not announced until after the stock market had closed.

Last month, Federated reported its first-quarter net income fell 35 percent to $58 million from $89 million in the year-earlier period. Sales fell 5.2 percent to $3.82 billion from $4.03 billion, the company said.

Liberty House, founded in Hawaii as H. Hackfeld & Co. in 1849, is Hawaii's oldest and largest retail chain, having survived two world wars and Hawaii's economic depression in the 1990s.

"I promise you that we will continue to honor that history," said Sullivan.


Store changes
excite shoppers

While they're sad to see
Liberty House go, they welcome
Macy's entry to local retail


By Russ Lynch
rlynch@starbulletin.com

Shoppers see good news and sad news at the announcement that all Liberty House stores in the islands will soon carry the Macy's name instead.

"It's too bad. Liberty House is like a household name," Gerald Moura of Kalihi said yesterday outside the Ala Moana Liberty House.

"But I like Macy's," he said. "That Christmas story, Macy's and Gimbel's and that," means everyone knows the Macy's name.

Like many other Liberty House customers, Moura said it is a favorite for his family to shop at different Liberty House outlets on Oahu. "I think they've been good all these years," he said.

Also like other regulars, he thinks that as long as the quality of the merchandise remains high, there's no harm in the change.

"I'm excited about Macy's," Moura said.

Darrell Puu of Hawaii Kai, who had just bought a bubble spa machine at the Ala Moana store for his bathroom, said the change to Macy's is "fine with me."

Puu, shopping with his 10-year-old son Brice, said he has been a regular shopper at Liberty House for at least 20 years. "Usually I buy something," he said.

Jerry Busone, a former University of Hawaii women's basketball coach who just returned to the islands a week ago to take a regional position with an electronic data processing firm, popped into Ala Moana Liberty House to buy a gift while he is getting a condominium unit ready. "I was here 15 years ago" and shopped at Liberty House then, he said.

"Liberty House has great quality," he said, and the Macy's entry brings one of the great American retailing brands to the islands. Busone said he buys aloha wear and dress slacks for himself at Liberty House and gifts for others.

Other shoppers said they know about Macy's from its famous Thanksgiving Day parade in New York City, televised nationally, and of course from the 1947 movie "Miracle on 34th Street."

They also associate the Macy's name with quality.

The general feeling among shoppers at Ala Moana and downtown was that as long as the quality, price and variety of merchandise remain at least as good as those of Liberty House, Macy's will be good for Hawaii.


Sale gives Federated
first isle exposure

Some highlights of the purchase of Liberty House:

>> What: Sold to Federated Department Stores Inc. are all 11 Liberty House department stores on Oahu, Maui, Kauai and the Big Island; the single Liberty House department store in Guam; and seven of the eight Liberty House specialty stores in Hawaii.

One small specialty shop, on Kauai, will close.

>> Who: Cincinnati-based Federated will absorb the Liberty House stores into its Macy's West division.

All of the stores will be renamed Macy's. Federated, which reported $3.82 billion in sales in the first quarter, runs 432 retail stores nationwide and also owns Macy's East, Bloomingdale's, Burdines, Lazarus, Goldsmith's, Rich's, Bon Marche and several direct-to-customer sales divisions.

This is Federated's first operation in Hawaii.

The islands will be overseen by Deena Nichols, Macy's newly appointed senior vice president for Hawaii. Liberty House President John Monahan will step down.

>> When: The sale could close as soon as July 9.

The conversion of the stores could be completed in time for the Christmas shopping season, but a timetable is not yet firm.

>> How much: The exact purchase price was not immediately disclosed.

In a release, Federated said it expects to take a $50 million to $60 million one-time charge from the acquisition, though analysts expect the actual price will be much more than that. Federated also plans to add about $24 million in conversion capital to its existing capital budget in 2001.

The purchase price is expected to be released eventually, since Federated is a public company.

>> Why: Hawaii's economy has improved since Federated last entered talks to buy Liberty House in 1997.

Those negotiations fell apart months before Liberty House filed for bankruptcy protection from creditors.

Both sides began talking again after Liberty House emerged from the three-year bankruptcy in March. Federated also said it got a better deal this time around.

>> The sellers: Two private venture capital firms, Oaktree Capital Management LLC of Los Angeles and DDJ Capital Management LLC of Wellesley, Mass.

The companies, which typically seek high returns on the assets of distressed companies, bought up the bulk of Liberty House's devalued debt during its bankruptcy.




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