Federated Department Stores is soon to sign a deal to buy Liberty House Inc, a department store chain based in Hawaii which has recently emerged from bankruptcy court proceedings, the Wall Street Journal reported.

The chain, around 150-years-old, could possibly become a part of the Macy's West division, a subsidiary of FDS. The move would open up a new market territory for Federated, whose sales have been hit by the US economic slowdown.

The talks were originally reported in the Honolulu Advertiser.

Liberty House operates about a dozen department stores and eight specialty shops and employs 3,000 people. It filed for bankruptcy protection under Chapter 11 of the US Bankruptcy Code in March of 1998 during a statewide economic slump. The chain suffered particularly from a decline in Japanese tourism. At the time of its Chapter 11 filing, Liberty House listed assets of $284m and liabilities of $248.4m.