Federated Department Stores Inc. (FD) plans to buy rival May Department Stores Co. (MAY) for about $11 billion in a deal that would combine famous store brands such as Bloomingdale's, Macy's and Marshall Field's (search), people familiar with the situation said on Sunday.

Federated will pay roughly $36 a share for May, the people said. Based on May's 308 million shares outstanding as of Jan. 29, that would value the deal at about $11 billion.

The boards of both retailers have approved the deal, which is expected to be announced on Monday, sources said. The companies could not be immediately reached for comment.

The deal comes in the wake of increased consolidation in the retail industry. Merger activity more than doubled in the United States to $41.8 billion in 2004, up from $19.2 billion in 2003, according to research firm Dealogic (search).

The May-Federated deal would consummate a marriage between the two companies after they held unsuccessful merger negotiations two years ago. Although the companies have held talks on and off for months, talks accelerated after May's chairman and chief executive, Gene Kahn (search), resigned in January, sources said.

"This deal is all about timing. Without a CEO, May had no bargaining power and no time to get their operations back on track. If this was two years from now, this situation wouldn't have unfolded quite the way it did or with the speed it did," said one person close to May.

The merger also brings former rivals together. May last year beat Federated in a competitive auction to acquire the Marshall Field's department store group. Now, Federated will be absorbing both.