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Buyout rumor lifts Macy's stock

CINCINNATI -- Macy's Inc. may be finding its way out of its troubles by going private.

Rumors have been rampant that the company may be the target of a leveraged buyout. The stock price rose yester day after a report said a private equity firm is pondering a $24 billion bid.

Kohlberg Kravis Roberts & Co. is studying an offer to buy the Cincinnati-based retailer for $52 a share, according to the trade paper Women's Wear Daily. It also reported that Principal Investment Area, Goldman Sachs Group's private equity arm, and its real estate group are believed to be participating in the negotiations.

Shares of Macy's soared more than 7.6 percent to close near the high end of its 52-week range of $33.52 to $46.70.

Spokesmen for Macy's and KKR declined to comment.

A person close to the situation who asked not to be named said Goldman Sachs was not involved in the talks.

Liz Dunn of Thomas Weisel Partners wrote in a report that Macy's owns 54 percent of its real estate, roughly twice the department store average.

Buyout rumors have driven shares up in recent weeks as Macy's struggles to reinvigorate its business. In September, the retailer has converted most of its former May Department Store Co. stores into Macy's, transforming Macy's into a national brand. The turnaround of the former May stores hasn't progressed as well as expected, though.

Women's Wear Daily said it was believed that KKR would keep the current Macy's management, including chairman and CEO Terry Lundgren, who orchestrated Macy's acquisition of May in 2005.

At the annual shareholders' meeting, Lundgren blamed disappointing sales in part on strategic changes made too quickly at the former May stores. The retailer, which also operates Bloomingdale's, has been facing challenges such as a weakening home market, which has depressed its home furnishings sales.

Macy's reported last week that sales at stores open at least a year, considered a key indicator of a retailer's strength, fell 2.7 percent in June. Analysts surveyed by Thomson Financial expected same-store sales to fall just 0.8 percent.

The company also said earnings for the second quarter, expected to be reported Aug. 6, would be much lower than in the year-earlier period.