The May Department Stores Company has entered into a definitive agreement to acquire the Marshall Field's department store group and nine Mervyn's store locations in the Twin Cities area from Target Corporation for a total consideration of $3.240 billion in cash, subject to adjustments.

The transaction is expected to be completed in May's fiscal 2004 second or third quarter.

Marshall Field's, which reported revenues of $2.58 billion and generated $107 million in segment earnings in fiscal 2003, has 62 stores primarily in the Chicago, Minneapolis and Detroit metropolitan areas. Locations include its world-famous flagship store on State Street in the Chicago Loop and important flagship stores in Detroit, Minneapolis, and suburban Chicago. With the addition of Marshall Field's, May will operate 500 department stores in 39 states.

Under the terms of the agreement, May will acquire all the assets that comprise Marshall Field's, including stores, inventory, customer receivables, and distribution centers in Chicago, Detroit and Minneapolis. May is also acquiring the real estate associated with the nine Mervyn's stores.

Gene Kahn, May's chairman and chief executive officer, said, “We are delighted to welcome this venerable and nationally recognized, premier department store company as a division of May and to welcome the Marshall Field's associates to our company. This unique opportunity to add to our department store portfolio will provide a great value to our shareowners. It will allow us to combine the best of Marshall Field's and May to further expand and enhance the products and services we can provide to our customers. Among the benefits we see is that this combination will produce excellent economies of scale, improved buying power, and an expanded distribution network.”

After completion of the acquisition and its integration into May, the company expects to realize pre-tax synergies of $85 million in fiscal year 2005, $140 million in fiscal year 2006, and $180 million per year thereafter. The acquisition is expected to be accretive to earnings per share in fiscal year 2005 and beyond.

May will retain the Marshall Field's nameplate and operate it as one of the stand-alone department store divisions under the May umbrella. May also intends to maintain the product exclusives — such as Frango mints — that are long-standing traditions at Marshall Field's. Linda L. Ahlers will remain as president of Marshall Field's, and headquarters for the division will remain in Minneapolis.

May will offer employment to all Marshall Field's associates.

The acquisition is subject to customary closing conditions, including Hart-Scott-Rodino approval under the United States antitrust laws. The transaction does not require shareowner approvals for either May or Target.