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Many wonder how deal will impact commercial properties

Future of state’s Gayfers stores uncertain in wake of proposed purchase by Dillard’s

The future of Gayfers department stores in the four locations in Mississippi where they overlap with Dillard’s has yet to be decided in the wake of a Dillard’s Inc. purchase offer for Mercantile Stores Co., the parent company of Gayfers and 12 other department stores.

Gayfers has stores in the same mall as Dillard’s in four Mississippi locations: North Park Mall and Metrocenter Mall in Jackson, the Edgewater Mall in Gulfport and at Turtle Creek Mall in Hattiesburg.

“We are aware of the overlap situation, of course,” said Julie Bull, director of investor relations for Dillard’s Inc. “What will be done is still being studied at this point.”

Bull said options could include “double headers,” the term for where Dillard’s has more than one store in a location. Forty of Dillard’s 272 locations have double headers. Other options being discussed include selling overlapping locations or trading those locations with other retailers.

Dillard’s made an offer May 21 to purchase the Mercantile Stores Co. for $80 per share. The tender offer expires June 19 unless extended. The takeover has the support of Mercantile’s founders, the Milliken family of South Carolina, which owns 40% of the shares.

Although some press reports said that all Mercantile stores, including Gayfers, would be renamed Dillard’s, Bull said that a final decision on renaming the stores hasn’t yet been made.

Some mall managers in Mississippi were hopeful that Gayfers would continue to operate along with Dillard’s. Mike Hackstadt, general manager of North Park Mall in Jackson, said even if Dillard’s opts to close one of its stores at North Park Mall, he expects the company to bring another department store to the location.

“Because we are such a strong location, they shouldn’t have any difficulty selling that location,” Hackstadt said. “If they opt to sell it, we will end up with another department store new to the area, and there could be positives associated with that.”

Hackstadt said that Gayfers owns the building and land at the North Park Mall location, and entered into a COREA (Construction Operating Reciprocal Easement Agreement) at the time of the mall construction that requires that location to be operated for another 11 years.

“Based on that we aren’t concerned with them just going dark. It will be operating as a department store,” he said. “It is just a question of what department store it will be.”

David Meadows, general manager of Turtle Creek Mall, said he felt both stores would continue to operate as separate entities. “I feel there will be very little if any change,” he said.

The offer by Dillard’s, which is headquartered in Little Rock, Ark., represents a $2.9 billion cash deal. Mercantile operates 103 predominately fashion apparel stores and 16 home fashion stores in 17 states primarily in the Southeast and Midwest. Mercantile’s sales for fiscal 1997 exceeded $3 billion.

Dillard’s, which was founded by William Dillard in 1938, owns 272 stores in 27 states.

William Dillard II, CEO of Dillard’s, said that the company has admired Mercantile for many years.

“They have achieved the number one market position in 70% of their markets,” Dillard said. “This could not have been accomplished without a great pool of talent. The stores are a great fit for the Dillard’s location strategy, ranging from urban to less populated area. This acquisition will allow us to broaden the markets in which we have stores and help us to better serve customers in our existing markets.”

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