Rapid American Agrees to Sell 796 Stores : Limited Plans to Buy Lerner Chain

The Limited Inc., continuing a three-year acquisition binge, said Monday that it has reached an agreement in principle to acquire all 796 Lerner Stores from New York-based Rapid American Corp. for about $260 million.

The Columbus, Ohio, company’s move into the budget women’s apparel business comes less than a year after it made a surprise but unsuccessful attempt to take over Los Angeles-based Carter Hawley Hale Stores Inc., which operates the Broadway, Neiman-Marcus, Bergdorf Goodman and other premium chains.

Leslie H. Wexner, who founded The Limited in 1963 and is its chairman, said the purchase, for a combination of cash and subordinated notes, is subject to a definitive agreement and review by federal antitrust agencies.

“Lerner is the largest and oldest chain of women’s stores and is in the budget tier,” Wexner said in a telephone interview. “All of our businesses are in the women’s apparel store business. There is a great synergism . . . between these two businesses.”

Lerner, which was founded in 1918, operates in 45 states, including California, but has been suffering declining profits despite annual sales of about $700 million. It was purchased in 1973 by McCrory Corp., which also operates J. J. Newberry and McCrory.

McCrory is a subsidiary of privately held Rapid American, officials of which could not be reached for comment on the Lerner deal.

Robert S. Corea, an analyst with Ohio Co., a brokerage in Columbus, said: “It is my understanding that (Lerner’s) sales are about $700 million, with net income at $20 million. That’s pretty lousy.”

He said that, in fiscal 1982, Lerner had sales of about $717 million and profits of $46.8 million.

Corea said the addition of Lerner will enhance The Limited’s overall concept as an operator of women’s specialty apparel stores and added that “the price is very, very good.”

The Limited’s 1984 results are not available, but Wexner said analysts are projecting its sales at $1.4 billion and profits at $90 million for the year ended in January.

The company’s stock closed Monday on the New York Stock Exchange at $31.50 a share, up $0.375.

The Limited has 1,450 stores, offering upscale career and sportswear looks through The Limited, junior sportswear at the Limited Express, specialty sizes at Lane Bryant, bought in 1982, and off-price apparel at Pic-A-Dilly, which was acquired last August from Lucky Stores Inc.

“It’s typical of their style; you saw it with Lane Bryant, Pic-A-Dilly and now Lerner,” Corea said. “They pick up potentially productive stores that need to be fixed up. They fixed up Lane Bryant in five quarters. I can’t see any reason why they can’t do the same with this one.”

Wexner denied that the Lerner acquisition appeared to be a shift in strategy from The Limited’s pursuit last April of Carter Hawley’s premium retail outlets.

“From an outsider’s point of view, it could look like a shift in strategy, but it is possible to go down two tracks at the same time. Clearly, we are not off Carter Hawley’s case,” he said.

Wexner said attorneys for The Limited are taking depositions from various Carter Hawley executives and the company’s financial committee as part of its continuing legal challenge to Carter Hawley’s controversial anti-takeover moves, which included a stock-repurchase program and the sale of a preferred issue of stock to General Cinema Corp.

May Seek New Properties

Meanwhile, the Lerner sale continued to fuel speculation that Rapid American might be shopping for new retail properties.

Since Stephen Pistner’s departure as president and chief executive of Mobil Corp.’s Montgomery Ward unit to become chairman and chief executive of McCrory, rumors have persisted that McCrory and Rapid American might be interested in acquiring F. W. Woolworth or Montgomery Ward.

Sources close to Pistner and Wexner said Pistner was not a principal in the discussions to sell Lerner. But they said that he was aware that a major strategic change would take place and that he endorses the Lerner move so that McCrory can concentrate on its variety store and general merchandise business.