CAMPEAUS ACQUISITION OF FEDERATED - POST-BANKRUPTCY RESULTS

This paper updates Kaplan (1989) by comparing Federated Department Sto res' value before its purchase by Campeau Corporation to its post-bank ruptcy value. The post-bankruptcy value includes all direct and indire ct costs of bankruptcy and financial distress. Federated's assets incr eased in value by $3.1 billion in 1992 dollars (or $1.6 billion in 198 7 dollars). This increase is only slightly below that in Kaplan (1989) , suggesting that net bankruptcy costs were modest, and, possibly, non existent. The Federated purchase illustrates that a highly-leveraged t ransaction can increase value, but still be unable to meet its debt ob ligations; and bankruptcy (and financial distress) need not be costly.