Bon-Ton Buys a Piece of Saks

Yesterday Bon-Ton Stores, Inc. announced that it would acquire the "northern department store group" of Saks, Inc. for $1.1 billion in cash and $85 million in assumed debt. Bon-Ton, a regional department store chain headquartered in York, Pennsylvania, will more than double in size as a result of this merger, the latest in a string of consolidation across the many sectors of American retailing. The company currently operates 136 stores in 16 Northeastern and Midwestern states under the Elder-Beerman name as well as its own banner.

Bon-Ton will soon control the following chains in the Upper Midwest and Great Plains regions:

Bergner's (14 stores in Illinois)

Boston Store (10 stores in Wisconsin)

Carson Pirie Scott (31 stores in Illinois and Indiana)

Herberger's (40 stores in Colorado, Iowa, Minnesota, Montana, Nebraska, North Dakota, South Dakota, Wisconsin, and Wymoning)

Younker's (47 stores in Illinois, Iowa, Michigan, Minnesota, Nebraska, South Dakota, and Wisconsin)

It's interesting to note that these stores were acquired in the late 1990's by Proffitt's, a regional department store chain that had long been a major presence in the South. Proffitt's changed its name to Saks, Inc. after acquiring legendary luxury retailer Saks Fifth Avenue in 1998. The combination of Proffitt's "middle market" department stores and Saks' "upscale" units was ultimately unsuccessful, causing the company to recently put most of its stores up for sale. Having sold its Proffitt's and McRae's "southern stores" to Belk earlier this year, the company will consist of its namesake Saks Fifth Avenue units and Off 5th outlet stores, the somewhat posh Parisian chain, and its Club Libby Lu specialty division once the "northern stores" are acquired by Bon-Ton.

Yesterday's announcement demonstrates that regional department stores are far from extinction. While Saks (nee Proffitt's) may not have had much success with its "middle market" divisions, Bon-Ton could become a major force in the department store sector once it acquires these units. The somewhat modest company has focused on small towns and rural areas; however, the acquisition of Carson Pirie Scott will bring it into Chicago, one of the country's largest markets. "Carson's" has long been the primary rival of Marshall Field's on State Street and elsewhere in greater Chicago -- if local residents make good on their threats to stop patronizing Field's once it is absorbed by Macy's as a result of the Federated-May merger, Bon-Ton could gain a lot of customers. Unlike Federated, Bon-Ton plans to retain all of its local nameplates, including Carson Pirie Scott, for the foreseeable future.

Carson Pirie Scott's flagship store on State Street in Chicago