In a move largely expected and supported by most analysts, Federated Department Stores ( FD) said it is looking into buying Target's ( TGT) Marshall Field's department store chain.

Target had said last month that it was considering alternatives for both its 62-store Marshall Field's unit and its Mervyn's stores. Federated didn't release any additional details in its press release late Wednesday.

Merrill Lynch analyst Stacy Turnof thinks the announcement is good for Cincinnati-based Federated because it will expand the company's reach into more states.

Marshall Field's stores are located in eight states, she said, and Federated currently only has six stores in three of the states with the most Marshall Field's stores. "This will enable Federated to gain a foothold in areas where they have a minimum presence," Turnof said.

She values the Marshall Field's chain at $1.8 billion to $2.2 billion, which is 8 to 10 times her full-year 2005 EBITDA estimate of $224 million for the chain. With the money Target receives for Marshall Field's, analysts expect the company to repurchase stock, buy back debt and invest in its core Target division.

"Marshall Field's is a good march for Federated ," said a buy-side analyst who covers Target and asked not to be named. "It fills a hole where they need it in the middle of the country, and they're their kind of stores," he said.

Turnof added that "Federated will have the expertise to improve the operations of Marshall Field's business and grow it as a percentage of Federated's total sales." She expects that a post-transaction Marshall Field's would account for 18.5% of Federated's total sales in fiscal 2004.

Shares of Target were lately up 64 cents, or 1.5%, at $43.50, while shares of Federated were down 5 cents, or 0.1%, at $52.41.

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