BURLINGTON — Attorney General Thomas Reilly has put a stamp of approval on an agreement with Filene's and Macy's department stores that will have the Filene's in Burlington being sold.

In all, seven Federated stores (5 Macy's, 2 Filene's) will be sold.

Corporate owners of Filene's and Macy's department stores have agreed to a settlement with Massachusetts and four other states aimed at maintaining competition and choice for consumers in the wake of the recent retail mega-merger, AG Reilly announced.

"Filene's has been a shopping destination for generations. While it will be sad to see it go, it's important that consumers have choices among department stores here in Massachusetts," Reilly said.

"This agreement allows for the merger to go forward while at the same time protecting consumers' right to choice and competition."

The agreement with Federated Department Stores, Inc., and the newly-acquired May Department Store Company, he said, requires the retail corporation to allow rivals to fill the void created by the department store merger.

Under the terms of the agreement reached by AG Reilly and four other state attorneys general, Federated must divest overlapping stores to competing retailers in seven Massachusetts locations to include:

* Macy's or Filene's in Downtown Crossing in Boston

* Macy's at the Southshore Mall in Braintree

* Macy's at the Westgate Mall in Brockton

* Filene's at the Burlington Mall in Burlington

* Filene's at the Cape Cod Mall in Hyannis

* Macy's at the Natick Mall

* Macy's at the Northshore Mall in Peabody

According to Federated, each of the stores will continue to operate in these locations and across the country, and will be under either the Macy's or Bloomingdale's banner.

Under the terms of the settlement, Federated will be required to sell overlapping Macy's or Filene's stores in five mall locations in Braintree, Brockton, Burlington, Hyannis and Peabody for use by a competing department store if any such retailer or mall developer is interested in the location and submits a commercially reasonable offer for the location.

The goal

The objective is to allow for a new department store, not operated by Federated, to open in these locations, said Reilly. The competing department store may be a retailer not currently operating in the state, and under the agreement could include, among other stores, Nordstrom, Dillards, or Neiman-Marcus.

The settlement also requires that Federated use "commercially reasonable efforts" to divest either the Macy's or the Filene's in Downtown Crossing in Boston as well as the Macy's in the Natick Mall. Under the agreement, the expansion of the Natick Mall is expected to proceed as planned.

The agreement between the AGs and Federated was designed to ensure that Federated does not monopolize the department store space in any given mall.

The AGs contend in the agreement that the department stores operated by Federated and May "often comprise most or all of the conventional, full-service department stores within particular shopping centers, malls or other shopping areas. Such department stores offer consumers a distinctive combination of product choice, service and an appealing shopping experience that is not matched by smaller, more specialized retailers or by large discount stores."

Earlier this year, Federated, the parent company of Macy's and Bloomingdale's, announced plans to acquire the May Company, which operates Filene's and Lord & Taylor. The merger was finalized Tuesday.

The Federal Trade Commission, which worked with AG Reilly's office and the other state Attorneys General in reviewing the merger, took no action with respect to the merger.

The agreement with Federated was by AG Reilly and state Attorneys General from New York, California, Pennsylvania and Maryland.

Assistant Attorneys General Mary Freeley and Jeffrey Shapiro of AG Reilly's Consumer Protection and Antitrust Division are handling this case.